20-second summary
- International businesses need different cash flow solutions from those of domestic businesses.
- Managing cash flow is more complicated for businesses trading internationally.
- Extended and more complex trade cycles add another dimension.
- Periods of political and economic instability in your markets affect your cash flow.
- Planning is key. When you’re in the middle of a cash flow problem, it may be too late.
Full story
First, it’s important to get the basics right, according to Andrew Seager, General Manager, Cash Flow Solutions Group, Westpac. “Without proper cash flow management, business growth and profitability can be restricted. When managed effectively, a business can save time and money, and make the right decisions to achieve their goals,” Mr Seager said.
Poor cash flow management is a common cause of business failure. Often, it’s not a lack of sales, but a misunderstanding of the best ways to optimise payables and receivables cycles, that gets small to medium sized businesses in trouble, highlighted in the case study opposite.
Managing cash flow is especially crucial for businesses that trade internationally. An extended and more complicated trade cycle can put extra pressure on a business’ working capital and ultimately cash flow.
International businesses also face risks that many domestic businesses don’t including: the consequences of political and economic instability; government regulations such as restrictions on certain imports, quarantine and labelling standards; difficulties in chasing payment over thousands of kilometres; and fluctuating exchange rates.
For example, if you are an exporter, you will find that there is likely to be a significant period of time between manufacturing and shipping goods and receiving payment. Short-term bank finance can ease this pressure, and the most popular options are trade finance and foreign currency trade overdrafts.
Westpac’s Cash Flow Solutions Group can help businesses that trade internationally find the appropriate cash flow solutions, taking into account their particular business objectives, needs and terms of trade.
“We’ve seen companies that have had their cash tied up in assets for possibly the wrong reasons, and have worked with them to get their cash flowing again,” Mr Seager said. “We’re often asked by businesses: ‘Are we managing our cash flow and utilising our assets effectively?’ ‘Are we managing the terms of our assets, to the life of those assets?’”
“The good news is that we can assist with answers to these and other working capital questions. Our team of highly qualified specialists have the skills and experience to work with businesses across the cash flow cycle.”
The Cash Flow Solutions Group also facilitates a range of educational seminars for small to medium sized businesses through their Business Advisory Services team. The Beyond Survival and Bite Size Business Workshops offer education and advice to help business owners understand and improve key drivers of profit and cash, and ultimately grow the potential value of a customer’s business.
To help businesses further, the team has put together a range of free advice guides on key issues including ‘Starting a business’, ‘Buying a business’, ‘Hiring the right staff’ and, of course, ‘Managing cash flow' or for more information on how Westpac can assist with international trade needs visit www.westpac.com.au/trade