Rupert Cutler, Director of BExA member Holtarka Ltd, shares his thoughts on what exporters need to consider as they navigate the dual pressures of Covid-19 and Brexit in order to ensure that they "keep selling, get paid and grow exports profitably".
How is your business doing? A downturn forces a review where different products and markets may be considered. The sooner you recognise risks the less vulnerable is your profitability.
What have you done to support and protect your business?
What are your lead times to delivery and payment?
“You have won the export contract, what next?”
This may be needed for the main contract itself (Build) and for contract essential Supplementary Services (Delivery and Payment)
The export contract is your legally enforceable agreement to supply specified goods and/or services to the overseas buyer with a stated description of how this is to be done by you, conditions for you and the buyer, defined timelines for delivery and agreed pricing and the currency for your payment.
Main Contract finance to Build If not self-financed you will need to borrow externally from current or new sources of finance for the loan from:
Supplementary Services for Delivery and Payment being the costs and fees in addition to the total agreed purchase price for the contract which can include:-
Production Design & Materials Third Party deliverables on time for the Supply Chain components including storage and transit (from where to where and is the conveyance & shipper and storage acceptable) prior to and after assembly/testing/shipping.
Export freight, regulation duties & taxes What types apply and route for transit(s)?
Law – Do the Contract terms state the rights and responsibilities of you and the buyer? Are the terms clearly understood and enforceable?
Points to consider:
Insurance – What policy limits/sums insured do you have in place and for what types of possible losses to your company? Any requirements to retain uncovered part or all of losses?
Shipment to Buyer how, when, where and alternate routes and any temporary storage?
Payment what currency will you be paid in and is it freely convertible? Who is the overseas correspondent bank to pay your bank and how long will payment take from the buyers account to your nominated account?
Timeline to success
The contract may have taken time to win, closing it may also take longer than you think. In our experience the longer the lead time the more likely you will succeed with robust and affordable support to the contract.
Financiers, lawyers and insurers are now working remotely which adds time and with demands from others it is key to have your request clearly supported with all the necessary information about you, the contract and the buyer. Off the shelf or standard products may not meet the needs and expectations of you, the buyer or the financier.
Your stipulations for finance and insurance must always be considered within your risk context, in a timely and cost-effective manner for increased profitability.
Clear presentation can move external support for a new export contract from a “no” to a “maybe” to a negotiated “yes”.
Success is measured in your profit, reputation and repeat business and gives you access to:-
Keep selling, get paid, grow exports profitably.
About the author:
Rupert Cutler LLB (Hons) ACII CIB is Director and Principal of Holtarka Limited, an independent risk and insurance consultancy with over thirty year's experience in the international trade finance and investment insurance sector in both the public and private fields.
We are also a FCA regulated Authorised Representative of Lloyds Broker Bellwood Prestbury Limited (www.bellwoodprestbury.com).
Posted 27 Oct 2020