The need to improve operational processes and manage costs is now more critical than ever as South Africa’s consumer confidence slump, sticky inflation, political instability and fears of a recession continue to impact businesses and trade. Additionally, given the number of issues and changing business views on imports, logistics and handling, it has become imperative for companies to adopt a more efficient, sustainable and diversified approach to their import operations.
Yet keeping abreast of industry movements and trends in the imports space and knowing the right time to make a move that will encourage business growth, can be difficult. As a result, many companies today are turning to finance capitalists and import solution providers to assist them in managing these market challenges, as it allows for greater risk management around external factors, especially when future development plans rely on investors to inject capital.
Many foreign suppliers post-Covid have moved towards limited payment terms and cash on delivery, while letters of credit are needed to help manage the business risk - making negotiating payment terms and early settlement discounts critical to understanding how best to manage working capital cycles, especially given the high interest rate environment. Of course, access to working capital funding is essential for businesses to take advantage of these opportunities, and establishing relationships with the right financial partner who understands your business and can move quickly on credit decisions, can be instrumental to improving profitability.
In fact, working with a finance partner where forex, logistics and trade finance are on one platform enables importers to manage their working capital better. While supply chain disruptions have settled post Covid, foreign based suppliers do not always adhere to the procurement schedule. This creates demand spikes in the working capital cycle and has the knock-on effect of extended sales days to realise debtors. In these instances, the ability to manage supply chain efficiencies through production tracking, understanding how best to negotiate payment terms on erratic shipments, and having direct control over forex hedging strategies is key to smoothing over working capital needs and preserving margins.
Given these challenges and the pressure for businesses to effectively execute their strategies to capitalise on opportunities, it is no wonder that so many turn to import partners to help them use their working capital where it is needed most and plan, pre-empt and mitigate as far as possible – giving them the headroom to grow.