Managing cash flow is one of the most challenging tasks for medium-sized exporters in India. Although the opportunities for growth in international trade are enormous, a minor issue in cash management can disrupt operations, delay shipments, and compromise the security of profitable contracts. Exporters will spend a lot of time concentrating on production, logistics, and compliance, but fail to recognise how vulnerable their cash cycle is.
Below is a breakdown of the most common cash flow mistakes that exporters are prone to making, along with guidance on how to avoid them.
- Neglecting Terms of Payment in the Export Contracts
Many exporters have to compromise on the liberal terms of payment to win overseas buyers, i.e., 60 or even 90 days’ grace period after delivery. Although this may win deals in the short term, it locks up working capital over the longer term. Lack of inflow consistently makes it hard to pay suppliers, employees, and freight costs.
The fix for this is to negotiate for more equitable payment terms that do not dry you up for liquidity. Giving discounts on early payment or using financial options such as bill discounting can help relieve the cash crunch.
- Heavily Depending on a Single Buyer
Relying on a single large customer can strain cash flow in case of a delay in payment or a decrease in order volumes. This prevalent risk of concentration can dry up revenue and leave no space for an emergency protector.
Exporters need to broaden their market of buyers. Having a variety of smaller to mid-sized clients diversifies the risk and provides for a more stable income stream. Continuous evaluation of the credibility of a client may prevent surprises, too.
- Ignoring Currency Fluctuation Impact
Most exporters fail to factor in the exchange rate fluctuations while budgeting future cash flow. A sharp depreciation of a foreign currency can significantly cut down on your real income, even if you dispose of the same amount of goods.
In order to handle this, there are hedging options through banks or forex services available. These tools defend your margins and allow you to have predictability in your receivables.
- Poor Inventory Planning
The medium exporters tend to have too much or too little inventory. Overstocking corrupts capital and warehouse capacity while understocking stalls orders, and lowers customer satisfaction. In either situation, there is suffering in cash flow.
Plan better using the demand forecasting tools and data analytics. There is a possibility of realising a lean inventory system that can release cash and carry costs without sacrificing your order readiness.
- Delayed Invoicing and Poor Follow-Up
Lack of an effective system itself leads to the delay in invoice generation and follow-up by many Indian exporters. This directly implies your speed of receiving payments. A late invoice will be able to move your receivables cycle by weeks.
Invest in a good invoicing system and ensure you follow up in good time. Automating reminders and monitoring the milestones in payment will ensure the collections are timely.
Quick Fix Checklist for Exporter Cash Flow Issues
- Track Receivables Weekly
Stop waiting till the end of the month—start checking your incoming payments weekly and spot the delays early.
- Negotiate Smarter Credit Terms
Discuss with the buyers about shorter cycles of payment or payment in instalments based on milestones. Sometimes, it does not come down to lengthier credit. It’s about sustainable cash flow.
- Build a Cash Reserve Buffer
Deposit a percentage of each invoice to build a little emergency fund. This helps to fill in the gaps when funds get stalled.
- Review Hidden Cost Leakages
Review freight, packaging, and warehousing invoices every three months. Small leakages can be silent killers of working capital.
- Automate Invoice Tracking
Employ simple tools or accounting software to identify late bills immediately – do not do it manually or through memory.
- Design a Cash-Flow Calendar monthly
Mark expected inflows and outflows. It gives you a visual appreciation of your funds and protects against unexpected shortfalls.
Fix Your Cash Flow Before You Break Down
For Indian exporters who want to grow, obtaining and managing cash flow is not merely an accounting problem, but a matter of success and failure. With common pitfalls, exporters can insulate themselves from financial shocks and develop more resilient operations by taking lessons from such mistakes.
Fixing these gaps does not necessarily mean that you have to change the entire business. In some cases, even the tiny steps like improved contract terms, invoice automation, and utilisation of more buyers can bring significant changes to working capital health.
Credlix provides export-oriented financing solutions to meet the needs of Indian businesses. Being a startup exporter or a growing mid-sized enterprise, with Credlix, you can access working capital with invoice-based financing, with no requirement for collateral. With fast disbursals, GST compliance, seamless integration to your workflow, you get the funding support when you need it. Find out how to leverage Credlix to drive your exports whilst having a healthy and predictable cash cycle.
