Supply chains are a major talking point in the business world at the moment. Ongoing pressures on international trade, from struggling Brexit negotiations to the Trump-China trade war, have shone a spotlight on supply chain practices, particularly amongst smaller businesses who are more likely to feel the squeeze.
On a smaller scale, many businesses are re-evaluating how they trade internationally as a result of these macroeconomic pressures. Despite the challenges, businesses shouldn’t be discouraged. Organizations can aim to reduce friction within their own supply chains to deal with the impacts of new tariffs or customs regulations.
Certain types of businesses will place a focus on introducing leaner logistical practices. An efficient supply chain should pull, not push, and leaner logistics often goes hand-in-hand with reducing waste. These businesses will therefore look to manufacture only what is in demand or what has been ordered by customers, in order to avoid excessive stock build-up.
Others businesses might look at integrating different business units to improve overall performance – for example, a UK logistics specialist integrating with a European partner to ensure access to the wider European Union.
Assess international payments
All businesses will have a need to tighten up the way they pay international suppliers, disperse funds to foreign operations and repatriate their profits from overseas sales.
On the surface, disruptive new tariffs look like they spell trouble. But the incremental savings businesses can accumulate by getting their international payments and reducing the rates they pay for transactions overseas can mitigate impacts from a hike in tariffs.
In other words, a thorough assessment of their international payments will be crucial.
Removing barriers to global market entry
Cross-border businesses are starting to turn away from traditional payment providers and towards specialist fintech companies.
While these fintech companies are younger, they have spent years developing and investing in technology and practices to refine the process of moving money across borders in a frictionless manner. While challenging the incumbents in the payments sector simply used to mean running cheaper, quicker and easier operations, progress continues to be made.
Undoubtedly, the end goal is to make trading abroad smooth and easy for businesses of all sizes. But more recently, the focus switched from offering a price-centric proposition to eradicating the barriers to entry for overseas expansion.
Improving international payments
In the previous couple of years, there have been two main innovations in the payments sector that have been designed to improve the speed and efficiency of international payments.
In sectors such as shipping, there has been a lot of noise about the potential of blockchain technology. Its immutability and decentralised system would allow manufacturers, shipping agents, the end consumer and customs agents to use the same database to track goods across the world.
While the jury is still out on how effective it will prove in changing the process of moving money overseas, steps are being made to make the system more reliable. A payments network built on distributed ledger technology which is decentralised and impenetrable against fraud would provide all parties in a transaction with an incorruptible record of said transaction.
This would have significant impact on the payments sector moving forward, but in reality, a complete switch to blockchain would take years and would require a complete shift in the status quo of the industry.
Multi-currency platforms for smaller business
Another innovation that has come to the fore are multi-currency accounts. Historically, these were only available to large multinational companies with an international network and were subject to high monthly management fees.
However, fintech companies have been developing multi-currency platforms which serve as a viable option for smaller businesses. These platforms enable them to trade, invest and grow like a local company in a foreign country, without the need to pay for a significant number of boots on the ground.
Previously, businesses would have to use banks and maintain a presence abroad in order to open a foreign bank account. This was both time consuming and expensive for business owners. But a multi-currency platform allows a small business owner to open a bank account in different currencies, for example, USD and AUD, through a single platform.
Using a multi-currency platform, business owners don’t have to provide proof of residency or evidence of a local company entity. There’s no need for bricks and mortar headquarters, and no need to hire in-country staff to satisfy and manage the required market presence. A business’ presence in a country can now remain wholly digital.
Without these physical shackles, businesses can move their money from country’s currency to another for just a fraction of the price and hassle than under the archaic international banking stipulations of the past.
Seamless international payments
Ultimately, creating a trading environment where companies have access to their payment history across their supply chain through one platform will provide business owners with improved visibility.
International payments should be frictionless and not operate like a game of Mouse Trap. All parties would benefit from the seamless movement of money, as opposed to a convoluted mechanism reliant on idiosyncratic systems.
If anything positive came out of last decade’s financial crisis, it was the desire to develop new technology to create solutions that enable businesses to operate on a higher level than ever before. It was this desire that led to the establishment of a fully-fledged fintech industry.
For businesses that trade internationally and come under pressure from the decisions taken by those at the top, a focus on improving international payments can make a vital difference.