Q. make a range of sports clothing that I have recently discovered is very popular in the Far East. However, to date, my exports have been confined to Europe and sending goods to countries, such as Japan, is a big step for me. I want to avoid – and be protected from – non-payment or late payment. I am also concerned about currency fluctuations. Can you advise me on the best ways to avoid both of these threats? Also, do UK exporters usually use the pound or convert to the currency of their buyer?
David Robertson writes:

While exporting to Japan may seem like a big step, it’s a significant market and one that offers huge potential. As the UK’s largest export market outside Europe and the USA, Japan represents 12% of the world’s gross domestic product and took £8bn of UK goods and services in 2005.

As you have already made inroads into Europe and the current weakness of the dollar suggests that cracking the US market will be particularly tough, Japan and other Far Eastern markets seem like a sensible next step. Depending on the size of your business, it may be worth exploring with your finance provider the option of hedging against currency movements. However, hedging against export receipts comes at a cost beyond many smaller businesses.

Another challenge when entering a new market is ensuring you get paid. Currency payments, varying settlement times and language barriers can make invoice collection more difficult. So it’s worth looking at export factoring. First, your business could benefit from a continuous injection of working capital with up to 80% of the value of export invoices made available to you within 24 hours. Plus, by working with an export factoring firm, you would have access to its multi-lingual collections team, who will chase and collect outstanding payments on your behalf, as well as access an international network of bank accounts, meaning that your business can bypass many of the barriers and delays normally presented by language and payment difficulties.

Finally, you ask whether British exporters usually use the pound when exporting or convert to the currency of the buyer. This tends to vary on a case-by-case basis. However, invoicing in sterling would be the most risk-averse option – allowing your clients to be the ones who bear the risk of fluctuating exchange rates.

David Robertson is the chief executive of Bibby Financial Services, a specialist in the provision of cashflow facilities for small and growing businesses. www.bibbyfinancialservices.com