Manage the risks of exporting
Risks of exporting
Whenever you sell there are risks - your customer fails to pay, for example, or you get sued for harm caused by your product. But doing business with a customer in a different country, and perhaps using a different language and a different currency, can create extra risks and complications.
What risks are involved when exporting?
- Assessing the creditworthiness of your customer can be more difficult, while at the same time taking legal action to recover unpaid debts might be expensive or even impossible.
- Dealing with a different language, business culture and legal system can increase the risk of confusion and potential problems. Understanding the market is essential.
- Your customer's country can present risks. For example, the country might be economically weak, politically unstable or prone to natural disasters.
- Goods generally take longer to deliver overseas, adding an extra delay from when you incur costs such as raw materials to when the customer receives the goods and pays for them. This can increase your financial burden so it's important to check that you can afford to tie up working capital in exports. Read more about the basics of cashflow management.
- If you quote or sell in foreign currency, it's a good idea to protect yourself against the risk of changes in the exchange rate. Read more about foreign currency and exchange risks.
- If you are VAT registered, you must provide details of all your transactions with other European Union (EU) member states on your VAT return. You will need to complete additional monthly Intrastat declarations if your purchases from EU member states total more than £1.5 million of goods and/or your sales to EU member states will reach £250,000 in a year. Read our introduction to Intrastat.
- Companies overseas may try to copy your ideas or abuse your trade marks, and it can be difficult to protect and enforce your rights. Read more about intellectual property protection overseas.
- Managing international deliveries and payments can be more complex than when trading within the UK. You need to make sure that you have the right skills and resources.
- Your customer may be based in a country that imposes restrictions or limits on the type of goods you wish to export, which could cause delays or even prevent your dealings.
- If you are trading in a third country outside the European Union and there are trade barriers which make trading difficult, you can appeal to the Market Access Database (MADB) Complaint Register. This is a single entry point where you can request clarification on third-country tariffs, import formalities, documentation and other measures. You can also make complaints if you think trade barriers are unrealistic or illegal or are imposed unfairly.