Exporting commodities is inherently a risky endeavour.
Export firms are faced with the challenges of mitigating risks and structuring their company so that it will grow and earn a profit. As global trade continues to accelerate at a faster pace, it also grows in complexity. Exporters are faced with various challenges.
Here are some issues that exporters are expected to face in 2018, and some suggestions to effectively manage these challenges:
Long payment terms
One of the major challenges that exporters face is long payment terms because they usually create problems with working capital. When there is limited working capital and funds are depleting, many exporters turn to commodity finance to augment their financial needs without the need to take on other equity investment. Up-front costs are usually needed for the cost of producing and delivering goods.
Commodity finance firms usually provide self-liquidating and short-term financing that is tailor-fit to the business of each customer. Excellent commodity finance companies are committed to serving the specific needs of their clients by financing for the purchase or sale of commodities, providing for cargo movement worldwide, and hedging price risk.
Compliance with regulatory requirements worldwide
Aside from dealing with suppliers, customers, and shipping vessels, exporters are also faced with numerous regulations and requirements worldwide. Each country or port of call has different rules that must be complied with. These requirements and regulations were all necessitated due to political unrest, trade agreement revisions, rising measures to protect territorial interests, and just the staggering number of goods exported all over the world daily. Over the past few years, there have been several new free trade agreements between Europe, Africa, the Middle East, and the Asia-Pacific.
With the rise of these free trade agreements, there are also tighter compliance demands and complicated modifications on trade regulations. Exporters faced with these challenges need the assistance of technology to streamline, manage, and simplify these regulations and requirements.
The uncertainty of keeping goods moving from one point to another.
Many exporters will not see profit until the entire sales cycle has been fulfilled. That’s why it is important to get goods moving as fast and as efficiently as possible. The longer the goods sit on cargo vessels, the longer it is for a business owner to earn revenue. It is no secret that due to the staggering number of commodities plying the world’s oceans, there is a shipping capacity issue.
Aside from the shipping capacity crunch, the weather has become very unpredictable. There has been an unprecedented hurricane and typhoon season in the Atlantic and Pacific Oceans, respectively.
The shipping industry is now acquiring more sophisticated technology tools and tighter guidelines to address both the capacity and weather issues.
