Exporting creates significant new opportunities to grow your business.  It also brings new risks.  Not only do you have to consider issues such as credit and collections policies but you need to have a clear understanding of which countries present the best opportunities and how local customs will affect your business.

It can all be a bit overwhelming but there are a range of sources that you can turn to for help.  First, there are a number of government agencies that provide you with assistance such as Austrade.  These agencies will be able to provide you with a wide range of information on issues ranging from preparing your business to export through to marketing in an overseas environment.

Second, you can contact any one of numerous Chambers of Commerce located in most countries.  These organisations can be a great source of on the ground information as well as providing invaluable contacts of Australian business people who have been active in your chosen export market.

Why export?

Australia's exporting community is dominated by SMEs. Research from the Australian Bureau of Statistics (2007) reveals that almost 90 percent of Australian exporters are either small or medium sized enterprises. In addition, research conducted by Austrade and Sensis shows that around 15 percent of Australian SMEs now export their products and services around the globe.

But what are the benefits? Do exporters grow more quickly or make more money? Research shows that on average exporting does help the bottom line. SME exporters are more likely to have an aggressive expansion strategy than other SMEs - they are also more confident than non-exporters and are more bullish on profits, wages and employment.

Exporting can provide a range of benefits for SMEs, including:

• increased sales achieved as a result of access to new markets
• decreased production costs and increased productivity, resulting from the economies of scale and better use of resources that can be achieved due to greater volume
• diversion of risk resulting from an increased number of customers
• decreased vulnerability to economic fluctuations on the domestic market
• increased lifespan for products and services through links to new markets
• increased expertise and experience
• differentiation from competitors.

Three types of information every exporter needs

While you should gather as much information as possible there are three types of information that are absolutely critical - country information, industry information and business information.

Country information

The first question is which market will you export to?  For many this will be unplanned.  They will simply respond to an unanticipated overseas request for an order and without thinking about will have become exporters.  For others it will reflect a deliberate strategy.

However, whichever approach it reflects you will need to have an understanding of the risks involved in exporting to a particular country.  The information you will need includes:

• Is the country's economy stable and growing?
• Does the country have a healthy financial system, including credit system?
• Is the country politically stable and will any government policies or plans impact the strength of the economy moving forward?
• Is there any sovereign risk - i.e. can the government pay its bills?
• Does the country's business community have a history of paying their bills on time?

The answers to all of these questions will help you determine whether the country you are thinking of exporting to is a good risk or whether you should focus your exports elsewhere. 

Industry information

Once you've selected your target country or countries the next step is to make sure you understand the nature of the industry you are competing in.  For example, how many domestic competitors do you have, what and how do they charge, what is the quality of their product and what are their payment terms?

Answering each of these questions will help you better understand how competitive you will be in your target market and what factors, such as price, you may need to consider.  The information you gather may also help you determine whether you have any potential partners in the market that can help offset your risk and costs.

There are a range of sources from which you can gather industry information.  Your best starting point is probably a government agency like Austrade who can provide you with their own insights and help you identity other important sources of information.

Business risk

Just like when dealing with an Australian customer you will need to gather specific information on your overseas customers.  However, there are some specific issues to consider when providing credit to overseas customers.
The first question is who can you turn to for assistance?  Accessing overseas company data can be extremely difficult so you need a reliable partner.  Dun & Bradstreet has data on 160 million companies in 193 countries providing you with the world's only truly global credit checking service.

The second question is what does the information mean?  A credit score or rating in one country may mean something different to what it means in Australia.  This means you need to ensure you have a detailed understanding of the information you are using and are able to interpret it in the correct way.  Included in this analysis should be an understanding of standard behaviours in the particular country of your customer.  For example if standard payment terms are 60 days then you need to consider this when assessing the speed with which you will get paid.

The key point here is to ensure that you apply as much rigour to your customer selection and credit decisions overseas as you do in Australia.  Having a deep understanding of your new customer's credit profile and the relationship of this profile to the industry and broader country trends is critical to making an informed decision.

Exporting can be a great way to expand your customer base, diversify your risk and grow your revenue.  But like every credit decision, overseas credit requires some specific knowledge and policies.

By arming yourself with information on your target country, industry and businesses you not just minimise your risk but target prospects that meet your risk profile.  This can help you open your business to a whole new world and make informed decisions that bring significant rewards.

This article is an excerpt from D&B's Guide to Cash Flow and Credit Risk.  To order a copy of this book visit our order page here >>

To credit check an overseas company today visit D&B Express or contact D&B Client Services on 13 23 33.