The recent hypothesis that creating economic growth and investment opportunities in many parts of the world is, according to some governments, the responsibility of business – in particular small and medium sized companies (SMEs).
Politicians, policy makers and many thought leaders believe SMEs hold the key to unlocking the wealth of our nation and for job creation – and one way they can achieve this is trading internationally; in other words buying from new suppliers and selling to new customers overseas.
However, engagement in foreign markets and knowing how to source new customers and suppliers can be a daunting prospect. Indeed, many SMEs are ill equipped to handle the added operational complexities of doing business in foreign currencies including managing accounts payable and receivable processes, implementing cash and risk management strategies and making and receiving international payments.
Research recently conducted by Western Union Business Solutions suggested many SMEs are unprepared for addressing foreign currency payables and receivables. In fact, more than half (59.5%) of UK SMEs stated that the impact of foreign currencies on their business was a major concern, placing it ahead of regulatory and compliance burdens, and concern surrounding the threat of local and cheaper competitors.
Technology to drive change for SMEs
Despite challenges ahead, research by business groups such as the CBI (Confederation of Business Industry) has revealed that small business confidence is on the rise, and SMEs expressed a clear desire to engage actively in exportation to foreign markets.
Perhaps one of the best solutions for ambitious SMEs hoping to achieve growth and ultimately success, is to turn to technologies capable of addressing the operational challenges resulting from international trade.
Foreign trade encourages growth
There is strong evidence that firms successfully engaged in exportation typically pay higher wages, employ more people and have higher productivity levels. Apart from the right product in the right market, having a competitively priced offering in the customer’s currency is critical to success, which is much easier said than done. A primary challenge in achieving this is creating predictable cash flows from overseas operations, which requires establishing certainty in the value of payables and receivables that are denominated in foreign currencies. Investing in capabilities that create such certainty is a critical focus for SME exporters.
Technology simplifies foreign cash management
Indeed, a large number of SMEs are turning to new technologies to equip their business to better manage their foreign cash, create certainty of their costs as well as price more competitively in foreign currencies, all leading to higher profits.
New digital platforms are available that allow businesses to see and manage all their international cash flows in one place, thereby enabling greater flexibility, control and insight of their business. WU Enterprise Digital Global Exchange, or EDGE, is a pioneering digital platform equipped with software applications that aim to address the key challenges that SMEs face in doing business in foreign currencies – a key requirement for being competitive internationally. Using the WU EDGE platform, businesses can instantly see the value of their foreign currency payables and receivables in their own currency, allowing them to make informed cash management decisions.
In addition, WU EDGE aims to drive operating efficiencies for businesses by having them be more closely connected to their customers and suppliers. Features including the EDGE Network payment help to co-ordinate the accounts payable and receivable process between buyers and sellers and provide a mechanism for fee free, near real-time fund transfers. Expanding on this theme of connecting buyers and sellers, the WU EDGE platform can help businesses establish new international connections, directly supporting their overseas expansion efforts. The fundamental driver behind WU EDGE is to help make buying and selling overseas as straightforward as doing business locally.
The adoption of emerging technologies amongst SMEs bodes well for global trade growth. Companies should be able to build trusted connections, find new trading partners while being able to manage their foreign cash and related processes easier and faster. Clearly, with the aid of technology, SMEs can branch out boldly into international export markets, to deliver economic growth, job creation and wealthier nations.
By Western Union Business Solutions President, Kerry Agiasotis