SME Advisory

Strategies to Optimize Cash Flow when Exporting in Nigeria


Trading between countries has been in motion for centuries, economic independence between countries has led to an increasing expansion of international trade worldwide. Managing and optimizing your cash flow is very relevant as it can make or break your business depending on how well you will handle it

When seeking to expand the reach of your products and services beyond your border, there are certain strategies that you need to employ in order to optimize your cash flow. And selling overseas will increase the pressure on your working capital.  For optimization of your cash flow, you will need to adopt the following strategies or solutions:

  1. Carry out research

The first strategy for you to implement is to carry out research work on the potential markets that you want to venture into, the demand and appetite of your consumers, the best medium of transporting your goods and how much additional time you will be able to get during your trade cycles. After carrying out research on them, you can now work out how they will affect your working capital cycle. Before your business starts trading, you should produce financial forecasts, at least for the next two years

  1. Review your existing bank facilities

You need to also take note of how you venturing into exporting will affect your bank facilities. You have to understand if the available banking facilities that you have are flexible enough to deal with delays in payment and to also cover your expenses over a long period of time.

  1. Find cash flow efficiencies

You should also find ways in which you can improve your cash flow through your trade cycle. If you work closely with your suppliers and customers, you will create cash flow efficiencies. These cash flow efficiencies has to do with paying your suppliers later and receiving payment from your customers earlier or in advance

  1. Manage the risk

Another strategy of optimizing cash flow when exporting is to access working capital support through finance options. One of the ways to ways to manage these risks is by acquiring a credit insurance especially when you are exporting to markets that come with difficulties, high risks and a need for high levels of security. Letters of Credit and Documentary Collection can also remove some of the risk from your exporting plans.

  1. Keep your eyes on your cash

Another strategy is to be on top of your trade cycle by checking whether any payment that was accrued has been received or whether your goods have gotten to their destination.  You will also need to take note of additional costs of transportation, security, borrowing etc.

  1. Cash reserves

Another strategy is to fully understand the reserves that are available for use in your business. In the case of a new start up business, your cash reserves will be the capital that is invested in the business. In the case of an existing business, your cash reserves could be loan facilities available to you that are unused yet or contingency funds that were built up. But you will need to be distinct with the amount that will be available for your exporting business and the one that will be needed for the current business activities

  1. Get Familiar with the sources of funding that are available to you

Another strategy to optimizing cash flow in the exporting business is to familiarize yourself with the wide array of financial support that financial institutions have designed to meet your specific needs. You could also ask your bank to introduce you to established international trade bankers with wealth of information that will be useful to you and your business since they have the experience of trading overseas. Some of these sources of finance include factoring which frees up money from your export invoice as soon as they are delivered and a letter of credit that is issued by a bank as a guarantee that as a seller you will receive payment due from a particular buyer

  1. Foreign currencies

Expose yourself to foreign currency fluctuation in order for you to be able to minimise it from the outset as currency fluctuations can mean that you receive less proceeds than you anticipated from the transactions. You can help minimise the risk by either asking for the transaction to be denominated in a stable currency or by arranging to be able to convert currency in the future at today’s exchange rate. If there is a possibility of noticing a currency in which the contract is denominated in advance, you have a real chance at managing the risk

  1. Additional costs

You should also understand that there will be additional costs in the process of exporting your goods to new markets. These additional costs will include licenses, regulatory requirements, insurance, transportation, documentations and taxes on the goods. Delays in the arrivals of the goods will also cost money and increase the risk

  1. Align your payment terms for payables and receivables

In a case where your creditors are demanding to be paid in 20 days and your debtors or customers are willing to pay you in 35 days, you will run out of money quickly. This is why you need to effectively manage your receivables efficiently and effectively by following up on payments that are supposed to be due and coupling up an agreement where you will charge an interest on late payments by customers

  1. Plan all your cash needs for the next quarter and years to come

In order to prevent unexpected events from happening, you can proceed to extend your lines of credit or by applying for a business loan and increasing your bank overdraft protection.

  1.  Determine your biggest expenses and negotiate with suppliers to get cheap deals

Your biggest expenses will include your cost of production, cost of purchasing raw materials and shipping the goods. You can proceed to negotiating with suppliers or you can put jobs out for tender

  1. Evaluate your tax situation

You can evaluate your tax situation and put the right structure in place for you to optimize your income after payment of taxes to the relevant tax authority

  1. Establish procedures for proper management of cash

You can establish various measures that will aid in the proper management of cash such as handling of mails, cheque authorizations, reconciliation schedules and online banking procedures

  1. Plan ahead and create a create a cross border strategy

Another strategy is to create a cross border strategy that will give support to the company’s cash flow while reducing foreign exchange risk. Find a partner that can help you determine what your cross-border payment needs are and set your actions accordingly.  One of the possible solutions to hedge Foreign exchange risk is a forward contract, which enables the exporter to sell at a set amount of foreign currency at a pre-agreed exchange rate with a delivery date from three days to one year into the future.

  1. Settle the invoices with overseas vendors in their local currency

Another method of optimizing cash flows in exporting is through settling your invoices with overseas vendors in their local currency. If your company trades in a high volume of trading with a currency or a country. It is more preferable to bill your customers in their local currency. Negotiating with foreign vendors in their currency will also give you the access to discounts.

  1. Use a budgeting tool that gives visibility to foreign exchange procedures

This will also simplify foreign accounts payable and when you are doing businesses with multiple currencies and also receiving payment in multiple currencies too.  It is helpful in using a payment solutions that will allow you to monitor your invoice. You can use a payment solution product that will aid you tracking your products and such products are offered by global financial institutions like Western Union

  1. Understanding the implications of borrowing

Another strategy towards optimizing your cash flows is to understanding the implications of borrowing from financial institutions. These implications includes interest rates changing overtime, transfer of ownership of assets to lender etc. it is important for you to fully understand the financial product you are applying for.

  1. Be aware of the tax free schemes and subsidies

Another way of maximising cash flow is to know if the goods you are exporting fall under any subsidy scheme by the government. Government of some trading countries offers reduced taxes, duty relief for exporters who are trading in specific goods and services. This will lead to reduced expenses and more gains for you


A delay in receiving payment from customers or debtors will also affect the company’s cash flow and one of the common ways of optimizing cash flow during exporting is to try to reduce your costs. Proper cash flow deals with planning ahead and trying to implement strategies to optimize it at a high level. Proper planning is key to having goods level of cash flow

About the author

Onamakinde Dare Daniel is a highly motivated accountant with knowledge in Accounting, Taxation, Management, Audit, Costing and Research. He is keen on tax matters due to its ever dynamic nature.

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