{"id":4318,"date":"2019-12-04T09:07:16","date_gmt":"2019-12-04T09:07:16","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=4318"},"modified":"2024-12-23T05:26:28","modified_gmt":"2024-12-23T05:26:28","slug":"reanalysing-cash-flows-in-global-trade","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/reanalysing-cash-flows-in-global-trade\/","title":{"rendered":"Reanalysing Cash Flows In Global Trade"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"4318\" class=\"elementor elementor-4318\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-28a78bf4 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"28a78bf4\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-2cd8e31a\" data-id=\"2cd8e31a\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1afccd3f elementor-widget elementor-widget-text-editor\" data-id=\"1afccd3f\" data-element_type=\"widget\" data-settings=\"{&quot;ekit_we_effect_on&quot;:&quot;none&quot;}\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p><i><span style=\"font-weight: 400;\">Against a backdrop of increased globalisation and flourishing economy, a comprehensive plan to handle working capital becomes necessary. Read to know how a holistic approach to working capital management can lead to significantly better results over time.<\/span><\/i><\/p><p><span style=\"font-weight: 400;\">Global trade involves a network of suppliers throughout the entire business journey from start to end irrespective of the geographical locations.<\/span><\/p><p><span style=\"font-weight: 400;\">Organisations whose businesses involve trade beyond the borders need to bolster their working capital with in the country and stabilise their supply chain with more effective management solutions.<\/span><\/p><p><span style=\"font-weight: 400;\">Creating tailored solutions is a great way to address the full breadth of the company\u2019s financial situation.<\/span><\/p><h2><b>Changing The Approach<\/b><\/h2><p><span style=\"font-weight: 400;\">The product-driven mindset of businesses means that the big picture gets ignored putting efficiencies on the table.<\/span><\/p><p><span style=\"font-weight: 400;\">Hence, organisations must be armed with effective tools to manage the backend process of global trade as manual procedures can be time-consuming. Additionally, cash flow itself has its own time-period and obstacles which is a separate entity altogether.<\/span><\/p><p><span style=\"font-weight: 400;\">The implementation of global trade management (GTM) solutions can be effective if it manages to eliminate the complexity of trade processes.<\/span><\/p><h2><b>Bottlenecks Of Liquidity<\/b><\/h2><p><span style=\"font-weight: 400;\">Working capital is the mainstay of businesses, whereas the focus should be more on opportunities to maximise cash flows.<\/span><\/p><p><span style=\"font-weight: 400;\">The ratio of production versus the cash flow is often imbalanced as demand and supply overtake the need to clear payments immediately for suppliers.<\/span><\/p><p><span style=\"font-weight: 400;\">Traditionally, the typical <a href=\"https:\/\/en.wikipedia.org\/wiki\/Working_capital\" target=\"_blank\" rel=\"noopener\">working capital cycle<\/a> affects the overall well-being of the business ecosystem. It also depends on other factors like:<\/span><\/p><ul><li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Access to liquidity<\/span><\/li><li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">State of its balance sheet (for instance, whether there are any covenants on outstanding loans)<\/span><\/li><li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Geographical footprint\u00a0<\/span><\/li><li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Currencies in which it is operating its business<\/span><\/li><\/ul><p><span style=\"font-weight: 400;\">Buyers focus on increasing their payment terms to the fullest as well as reducing their stock and inventory with the onus on their suppliers. But not all suppliers can manage the request for longer payment terms considering the changing regulatory environments and market conditions.<\/span><\/p><h2><b>Customising The Working Capital Solution<\/b><\/h2><p><span style=\"font-weight: 400;\">The influence of global flows on GDP is crucial over the long term while simultaneously raising productivity. The average global trade cycle, order through settlement, is 60-120 days, while few follow the 30-60 days cycle.<\/span><\/p><p><span style=\"font-weight: 400;\">The implementation of solutions to tackle working capital must include making better-informed procurement decisions while bringing down the average settlement cycle.<\/span><\/p><p><span style=\"font-weight: 400;\">The bulk of the business depends on clearing the payments for sellers which often results in the irregular supply chain. A tactical approach to customise working capital is adopting<\/span> <span style=\"font-weight: 400;\">cash discounting<\/span><span style=\"font-weight: 400;\"> by sellers who can encourage the buyer with an early payment discount. The idea is to ease the pressure on sellers who can get timely payments and manage their inventory effectively with no cessation of production.<\/span><\/p><p><span style=\"font-weight: 400;\">In a nutshell, this approach not only benefits the organisation in the near term but promotes further efficiencies over time.<\/span><\/p><h2><b>Conclusion:<\/b><\/h2><p><span style=\"font-weight: 400;\">Cross border sales, whether short term working capital needs or assisting purchasers with long term financing solutions, generally present exporters with financing challenges. Hence relying on supplier credit is quite common in international sales transactions, particularly in developing markets. To optimise the global supply chain, organisations need to raise the bar by developing better collaboration with suppliers, partners, and regulatory authorities while improving the visibility in the process.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Against a backdrop of increased globalisation and flourishing economy, a comprehensive plan to handle working capital becomes necessary. Read to know how a holistic approach to working capital management can lead to significantly better results over time. Global trade involves a network of suppliers throughout the entire business journey from start to end irrespective of [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":5113,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[35,112,127],"tags":[449,52,450,74,451,203,38,452],"class_list":["post-4318","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-cashflow-management","category-working-capital-business","tag-advanced-payments","tag-business-loans","tag-cash-discounting","tag-cash-flow","tag-global-trade","tag-liquidity","tag-working-capital","tag-working-capital-financing"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/4318","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=4318"}],"version-history":[{"count":4,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/4318\/revisions"}],"predecessor-version":[{"id":19708,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/4318\/revisions\/19708"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/5113"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=4318"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=4318"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=4318"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}