Due diligence for exporters starts with common sense, not dollars and cents. Do your research, assess your export proposition and check every aspect of an export deal, every step of the way. The Australian Institute of Export outlines some practical questions to ask of your export proposition. Practical Considerations Product: Only promise what you can deliver. Does the product include technical literature/advertising for new markets? Is the product cleared for entry in buyers market? Are all costs covered in your pricing? Logistics: Your packaging needs to be sufficient to protect your product during the trip. Are the goods insured until they reach a buyer's warehouse? Are there temperature/moisture concerns during transport? Have you explored the best options: air or sea/trans-shipment or direct? Export Pricing: Make sure you are using the correct Incoterms. Can you meet requests for different delivery options? Is the payment method safe? Cost plus or market based pricing? Payment risk: Ensure you have an enforceable contract in the buyers’ jurisdiction. Do you have different payment methods for different buyers? Is there a plan if they can't or don't pay? Are there any currency movement issues? Country risk: Assess the possible import restrictions, legislation, quotas and bans that might apply to your export. Have you evaluated the political and economic situation of the buyer’s country? Can you safeguard currency transfer risk? Funding requirements: Do a cashflow forecast for exports. Are working capital lines sufficient for increased export orders? Are there options to fund against receivables/stock? Documentation: Your export documentation has to meet Letter of Credit terms. Do you have entry documentation issues in certain markets? Are there delays in getting documents for shipments? Marketing: Think about an appropriate sales model in each market. Are there warranty/returns/ product liability issues to consider? Is there a written agreement in place for your agents or distributors? Trading partners The NSW Department of Industry, Trade, Regional Infrastructure and Services offers some practical tips for assessing a potential business partner. Don’t enter into a deal with a business or partner until you have checked them out, no matter how enticing the proposition may sound. Google them-if you see a string of complaints you probably need to ask a few more questions. You wouldn’t hire an employee without checking their references, so make sure you do the same for a potential business partner. Ask to speak to two of their customers and/or two of their suppliers-it’s the same as asking for referees at a job interview. Approach the relevant bilateral chamber of commerce, state or Austrade office in market and ask if they know of the business. You can also run a check with the local equivalent of the Consumer Affairs Bureau or Office of Fair Trading. Ask for their financials for the past three years-if they are happy to share its a good sign! Has the business had any recent cases of litigation? Usually, cases that have been prosecuted in the public court system will be listed on the web. If they check out on all of the above, then it is time to check with credit agencies or commercial bureaus like Dun & Bradstreet or Experian to see whether you should extend credit. These agencies have different levels of reports ranging from raw data to very comprehensive and costly reports. You can do all of this before you get legal teams involved, for a small cost. If you think about the problems you could avoid, it’s well worth the investment. Currency Travelex offer tips on how to mitigate currency risk. If you transact in AUD, you remove currency risk and put this back on your consumer. This is a hard term to negotiate if you are a small exporter, but it’s well worth asking about when you establish the terms of trade. If you receive foreign funds, you have the opportunity to benefit from movements in the foreign and local currency, and can hedge your risk with foreign exchange derivatives. Market risk: Know your profit margin and the base cost foreign exchange rate you will need to achieve it. Hedge accordingly. Know your customers: There are increasing cases of fraud especially in certain industries and high-risk countries. Be aware of these industries and markets and take precautions. Payment method: Understand how you will be paid as some countries still have a high use of cheques. If you are receiving cheques, they can be costly to exchange and have long clearing cycles. It is different to receiving a cheque in Australia. Plan accordingly to ensure your cash flows are not impacted negatively.