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Why it’s ‘shardly’ worth doing business overseas without due diligence...

09 July 2012

Last week saw the official inauguration of The Shard, London's newest skyscraper and (for now anyway) the tallest building in Europe, by Prince Andrew, Boris Johnson and the Prime Minister of Qatar. The building, which will change the London skyline forever, has been reported to have received 95% of its funding from the state of Qatar. It is not only the Qataris who are investing heavily in the UK. Indeed, there is a general public acceptance here that international investment is necessary, particularly with the current uncertainties being faced by our Eurozone trading partners, and a key component of a sustained economic recovery.

But while international investment can help reinvigorate the UK's fortunes, British companies still need to think globally to drive exports. More and more firms are looking for overseas opportunities and to find suppliers and trading partners who are not being directly affected by the Eurozone crisis. However, effective due diligence is essential to ensuring businesses can seize investment opportunities and trade abroad prosperously.

For many company owners, breaking into an overseas market for the first time, particularly when the UK economy appears to have entered a double dip recession, can be a great boost. However, celebrating a client win before taking time to assess that client's ability to pay invoices can lead to disappointment and bad debts if risks are not managed effectively. While the risk of doing business with any client needs to be assessed carefully,  trading overseas can put firms at increased risk of non-payment as these clients can be harder to trace and there can be little legal redress.

As such, it's good to see credit managers are choosing to use protective measures such as credit reports to research opportunities rather than cure methods such as employing debt collection agencies. Of those credit managers polled in a recent Graydon survey, 58 per cent cited credit reference agency purchased reports among the range of tools they use to guard against bad debts, compared with 23 per cent using debt collection agencies and 2 per cent using invoice discounting. The research also showed that companies are increasing the use of credit reference agencies in response to increasing economic volatility and are ensuring they manage their risk effectively whilst still seeking out new opportunities for growth.

Companies need to remember that even when the economy returns to health, it is crucial that businesses put safeguards in place to protect against the risk of non-payment and the impact that this could have on their business. Protection rather than cure needs to be the new motto for sustainable growth, all the more so while the UK is a hot destination for international investment today, investments trends can change very quickly, and not always in a nation's favour.

(ws)

This entry was written by Gordon, posted on 09 July 2012 Bookmark the permalink. Follow any comments here with the RSS feed for this post. You can post a comment.

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