Easing the Cash Flow Problem of International Businesses

It is every business leaders’ and financial planners’ priority to maintain a liquid and positive cash flow. Liquidity is the ability of the business to pay its short-term debts and other obligations as they come due. A positive cash flow means that business has more cash coming in than going out. A good cash flow projection is vital to the organization’s smooth business operations, profitability, financial stability, and success in establishing long-term goals and undertakings.

International and global businesses face bigger challenges in maintaining a positive cash flow. The introduction of international money transfers into their business matrix adds strain to the already tight cash flow balance.

How does international money transfers affect your cash flow?

There are factors unique to global businesses that increase its cash flow problems.

1. Costs of money transfers. First and the most visible factor is the costs of sending money abroad. As global businesses deal internationally, money transfers are inherent to the business environment. The costs of moving money from one country to another can be integrated into its operating overhead or into the costs of goods or services sold.
2. Required bank account balances. Setting up a business overseas involves a certain level of local integration that usually includes getting licenses and permits, setting up a satellite office, and setting up bank accounts. Depending on the country and type of accounts, banks require maintaining balances — these are money that should remain in the account at all times, money that you cannot use.
3. The cost of waiting. It takes some time to send money to bank accounts overseas. The usual wait time is 3–5 business days. It could be much longer if the location is remote. Whether it is an incoming or an outgoing money transfer, the money in transit untouchable and the wait adds to the cash flow turnover.

What is a cash flow problem?

The first hint of a cash flow problem is scrambling for cash to meet regular operational expenditures. Are you meeting all your payables? If you have to prioritize one bill over another, you already have a cash flow problem. It means that you already have a negative cash flow — less cash is coming in than going out. This leads to missed opportunities, added costs, and bad reputation among creditors.

How to boost a sluggish cash flow?

For a traditional business setup, the following techniques could effectively boost the cash flow;

• Streamline the accounts — If your business offers sales on account, it is possible that most of the cash are held up in the accounts receivables. So, you already recognized a sale and income, but the money is not yet in. Revitalize your collection efforts, offer early payment incentives, and on the opposite, charge late payment fees for delinquent accounts.
• Boost your sales campaigns — Sales is the main generator of cash inflow. Hype up your sales campaigns, offer special discounts to bulk orders or cash payments. If the sales is still not picking up, it’s time look deeper into your product and the market. Are there new similar, better, and improved products in the market? Is your pricing too high or too low? Review customer feedback and pick up important points on how you can improve your own product.
• Manage your inventory — Are there too much stock sitting in your warehouse? Stocking up for an expected surge in demand in the immediate future or for a seasonal buy is good. But, if you are stocking up on items that are readily available and don’t have any foreseeable demand, you are only trapping your cash in idle merchandise. What’s more, you are also increasing your overhead costs with the excessive stocks to house and secure.
• Make it easy for your clients to pay you — Set up various payment methods for your client to choose from. Visibly display payment options on your website or point of sales. For global businesses, consider that your buyers and clients will be from all over the world. Sending money internationally through banks might not be an attractive way of paying online purchases and could drive buyers away. Offer easy payment options like credit card payments, PayPal, and virtual money channels of money transfers.

Here are alternative ways of sending money internationally. 7 Ways to Send Money Internationally to Virtual Employees

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