Part 8: Importing from China

Importing from China: 4 Facts about cash flow and how to buy on credit from China.

4 FACTS ABOUT CASHFLOW AND HOW TO BUY ON CREDIT FROM CHINA:

- What is it and how to recognize the warning signs on a cash flow shortage?

- What are the causes of cash flow problems in business?

- Cash flow solutions for small business.

- Trade Finance and credit buying from China. 

Cash flow shortages constitute one of the most common threats when it comes to business management. Regardless of what sector your company operates in, cash flow can always undermine the essence of your business. Given the complexity of import- export, the following list will provide current and future entrepreneurs with a wider and more helpful understanding of the ebb and flow of cash flow management:  

1. What is a cash flow shortage?

Essentially, a shortage is a situation where the demand exceeds the available supply. In a case of cash flow shortage, we have to look at the demand as the comprehensive amount of expenses and costs which we have to deal with. Supply can be considered as the overall volume of financial resources at our disposal. If the costs exceed resources, it will result in a shortage.

2. How can I know if I am about to go through a period of cash flow shortage?

There are multiple symptoms of cash flow shortages. The most common ones are consistent late payment of supplier invoices, delays in payment of taxes and employee superannuation. In the worst-case scenario, it culminates with your company being late paying wages to staff.

3. What are the fundamental causes of cash flow shortages? 

Similarly to the symptoms, the causes can be varied:

- Decline in sales: a loss in sales may have a devastating effect on your cash flow. It's no surprise that this is the number one cause. 

- Poor credit approval: it is sad to admit but these days almost every business is highly dependent on [traditional] financial institutions. Therefore, it is recommended to have multiple financing options, should you face a credit crunch.

- Too much credit to customers: as is often the case, we tend to allow credit in order to facilitate relations with partners, especially in long chain industries like construction. It's tough to manage multiple long payment cycles across a customer base and it's easy to get stung.

- Too much stock: particularly for conglomerates which export from China to other destinations, the shipping time can be significant. Hence, many of us can opt for purchasing higher volumes; if that's the case, warehouses need to be managed very efficiently as many products can expire or not be sold. Therefore, we should focus on managing efficiently the amount of units that we store.

- Overtrading: when it comes to overtrading, companies are exposed to too many expenses (rent, personnel, management costs) and this may result in them being overstretched and not having adequate amounts of cash to ensure the growth and profitability of their businesses.               

4. I think I am in a experiencing a cash flow problem, am I doomed?

Not at all! There are solutions out there for you. We fully understand the importance of promptly dealing with a potential shortage. That is why our marketing division has been working hard to identify the solutions for every type of business active in importing from China.

Comments

Shivangi JHA

This can actually be useful as a lot of trade comes from chinda . Also trading from china is cheap and it will be easier this way .

Kevin Wong

As noted, a fundamental cause of cash flow shortage is a decline in sales. A decline in sales will have a significant effect on your cash flow, since a relatively small decline can cause a massive reduction in your profitability. This decline can occur when economic conditions deteriorate, there is an increase in competition from other global competitors, or new competitors enter the market.

Kevin Wong

As noted, a fundamental cause of cash flow shortage is a decline in sales. A decline in sales will have a significant effect on your cash flow, since a relatively small decline can cause a massive reduction in your profitability. This decline can occur when economic conditions deteriorate, there is an increase in competition from other global competitors, or new competitors enter the market.

Kriz Smith

No business will ever prosper without the owner's knowledge about proper cash flow. Thanks for sharing this post and highlighting the causes of cash flow problems. Helpful!

Kevin Jonson

I imagine it IS risky to have long payment cycles for too many suppliers. What is your recommended cycle length?

Scott Summers

I have been following this series for a good while now even if I am not in or from China he he. Overall I learned alot from their import practices.

Mia Batoy

I have learned so much from this blog.This is very insightful and I would love to read and learn more.

jas mine

I had a very good read.I will watch out for more.

Phanuel Bill

I thought cash flow problems was the definite end of any business on earth. You mean there is a way to save it? That is awesome.

Odim David

Cash flow shortage is critical for any business. I remember when a company held off paying staff salaries everyone knew there was cash flow problems. This article is a reminder that cash flow shortage is a problem to consider when importing from China.

Faith Kim

Thanks so much for this enlightening article. Considering the role China is playing in international trade, such a rich inside view of the market is very helpful. Thanks so much for sharing this.

April Dela Riva

To be experiencing a cash flow shortage is a nightmare to any business owner. While at times it may seem to be unavoidable given external and uncontrollable factors, it is good to know that your marketing division is doing all it can to provide and offer a rather fitting solution when this happens. Thanks for the heads up! I hope all service providers observe this scheme --to be a solutions provider.

Joseph Richards

very nice article. glad to know at the end there are ways to come back from it. some good warning signs . especially the credit limitations and paying wages

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