(Article by James Sinclair)
Once startups look to their next big order or customer, it is desirable to import goods or services to reduce costs, add value, increase efficiency and reduce supply chain risks by diversifying. Many UK businesses find this an attractive proposition, yet are often faced with challenges when importing. At Trade Finance Global, we’ve put together 8 top tips for you to be one of the thousands of UK businesses who collectively import over $650bn per year.
- Get The Basics Right: Write an Action Plan
Importing needs planning. Writing down clear objectives with timescales, costs and KPIs can help turn an idea into a well-developed strategy and plan of action.
- Speak To a Business Finance Broker
Business owners are often time-stretched, and getting access to business funding can be arduous and time consuming. Not only can a business finance broker save time and efficiency, but also money, given that there are often none or very little up-front fees and because they understand the commercial finance sector and will understand your business needs well.
- Do Your Due Diligence On Your Suppliers
Researching a market and your supplier is imperative if you are thinking of trading overseas. Checking information on suppliers such as business registrations, public documents and standard trade accreditations will help you understand the situation of the supplier and reduce risks of non-shipment.
- Learn and Negotiate The Correct Payment Terms
Negotiating payment terms to mutually benefit the importer and the export is crucial in ensuring a successful trade transaction. You should determine when you (or a trade finance lender) should pay the supplier for the goods: before shipment, proceeding shipment, or perhaps once it has reached a warehouse.
- Watch Out and Understand The Risks
There are several risks that business owners can find themselves in if they haven’t planned trading effectively.
Product risks: warranties, negligence, extreme weather and physical damage
Manufacturing risks: design, production and delivery of the product
Transport risks: cargo, damages, loss of products
Currency risks: forex volatility, payment terms and common currency
Even the smallest volatilities in the foreign exchange market can have huge implications on the price your business ends up paying for goods. Currency risk policies are important to plan for and consider when developing strategies for importing goods. Read our guide on managing currency exposures.
- Sort Out The Transport and Shipping
Shipping goods around the world is often seen as an arduous task. But the right amount of planning, advice from freight forwarders (see the UKTI guide), can iron out the bumps in an import transaction.
In summary, any products that are being shipped require a Bill of Lading or a Sea Waybill which outline information about the shipment and contracts of carrying the goods. You can read our guide on how shipping works when importing or exporting goods on Open to Export.
- Check The Rules on Import and Export Duties
Some goods may need licenses to import into the UK. The rules are listed on the BIS website. Furthermore, there is legislation which prevents the import of certain goods if they don’t meet EU Health and Safety requirements or need a specific import license. The EU also has certain trade agreements which mean that certain payments for importing goods are eligible if they come from a certain location.
- Don’t Give Up!
Once you have done your sums, you may find that your idea could be profitable. However this is just the site. Often financing such trade requires time and patience, as well as many decision makers, advisors, financiers and stakeholders both internally and externally.
James Sinclair is an associate at Trade Finance Global. He can be found on Twitter @TradeFinGlobal