Import/Export: How Necessary Are Digital Records?
As more UK companies focus on exports, the amount of time it takes to get paid remains a real barrier to wider participation.
Figures from the Office of National Statistics at the end of last year showed that nearly 10% of the entire country’s SMEs are involved in exports. That’s great news, but according to Adam Kasraoui at Bolero International, many firms are discouraged from exporting by the paperwork and way it prolongs time to payment.
It’s not just the effort required to fill in forms, it’s the days and weeks it takes to courier, store and amend documents in different areas of the globe. The longer it all takes, the greater the amount of time before an exporter is paid. On top of that there are the constant concerns about forgery and fraud – especially if you are dealing with customers in new markets.
Electronic bills of lading will transform efficiency
In the UK we’ve been a little slow to accept the huge efficiency gains of using electronic versions of crucial trade documents, such as bills of lading. The bill of lading is a crucial document in export. It is a receipt from the carrier for the goods, the contract for carriage, and a document that entitles the rightful holder to claim delivery of the cargo.
But it should no longer be part of “the paperwork” in a modern export-oriented economy. Using electronic bills of lading (eBLs) or letters of credit, export transactions are completed in hours, rather than weeks. The eBL is also legally equivalent to its paper forbear, with the major difference it can be authenticated and exchanged digitally and securely.
These are major advantages for the growing number of ad-hoc exporters who cannot afford to wait three weeks for documents to be prepared.
Advantages for banks and exporters alike
Digitisation not only enables exporters to be paid so much faster, it injects a huge amount of extra confidence into the trade and banking networks. Documents are encrypted and exchanged across platforms underpinned by a recognised body of jurisprudence such as English common law. Any amendments are automatically logged in an audit trail.
For a bank, the 24-hour visiibilty of digitisation makes it easier to understand the risks of providing working capital. Clarity about ownership of a cargo at any time generates transparency unavailable from paper documents in couriers’ pouches. Financial institutions can be more confident about who the trading counterparties are and who they are financing against at any point.
Digitisation can remove friction at borders and in ports
At a time when the UK is focused on increasing exports, the use of digitised trade documents can remove much friction from trade and align UK exporters with their counterparts in the Far East for example, who are racing ahead in their adoption of the technology.
Conservatism remains a problem, however, but the technology and the platforms are already available, it just requires more banks and exporters to adopt them. There are also shortfalls in awareness that have to be overcome. Many exporters don’t appreciate the full range of trade services available from banks and continue to finance export transactions using loans or overdrafts.
In the longer term, trade may undergo significant changes and be conducted on an entirely digital basis where letters of credit or open account trading are a thing of the past and risk protection is provided in a different form from today. But right now exporters need to ensure their banks offer them the advantages of today’s digital trade documents. It’s the single easiest way to get paid faster.