5 top tips from the financial experts
Welcome back to the Ultimate Guide series, where we have you covered on all the common questions on expanding to China, from how to have dinner with your business partner to the organisations that can help get you started, so that you will be braced and ready to get it right the first time around.
To round off the series we’ve been looking at how theory is put into practice by talking to experts in the field. Last week, we gained top tips from business owners who have expanded into China.
This week, we will be getting advice from a financial perspective. We caught up with finance experts Bessie Hassan, from finder.com.au and Alex Phillips, from LNP China. They shared five of their top tips for how to stay in control of your finances when doing business across the pacific:
1. Do your research
Before you start trading in China, be sure to do your homework surrounding local regulations, as well as your partner’s and their preferences, Bessie said. To start, you'll need to know what currency they prefer to trade in and if there are any government policies that may affect your transactions.
“Best practice involves doing your research, and in particular knowing what currencies you need to transfer. For instance, most Chinese businesses trade in CNY, CNH or USD so if you’re importing or exporting goods, it’s important to know what currency to trade in and the preferred currency of your clients or suppliers,”
Bessie Hassan, from finder.com.au said.
“Chinese banks keep a close eye on payment references so it’s essential that you assign a reference to your payment, and make sure you have the right details to avoid delays.”
2. Local support
Finding your feet in the Chinese market requires strong supporters on the ground, who can act as a go-between for your company and your partners. Alex believes having a local subsidiary or an agent is still the best option for foreign companies.
“It’s all about preparation and local support. Last year, we helped a leading producer of soft fruit & polytunnels grow their business from 0 to over $1million in less than 6 months,” said Alex Phillips, from LNP China.
“Exceptional account management of suppliers & customers, local contracts and a local team to process each order, from import to delivery and payment ensured that there were no surprises, which means happy customers, repeat orders and a fast-growing business in China.”
3. Robust contracts
The Chinese business environment tends to operate with lower levels of trust than Western economies, according to Alex, and generally requires additional diligence to contract terms to ensure the relationship is strong and protects all parties.
“Making sure you get paid requires going above and beyond what you would normally do back home,” Alex said. “Never process an order or start a project on a Purchase Order or written agreement alone (as is standard in many western economies).
All too often, we’ve seen the ‘final 10%’ or sometimes 50% of payments never arrive due to a weak paper trail. Get a local dual-language contract in place and chopped with the Chinese company seal. Maintain leverage over the product or services throughout the deal.”
4. Be thorough with all your paperwork
Bessie was adamant that you need to pay special attention to your administrative needs to ensure everything meets government regulations.
“When it comes to account details, there is no room for error. If there are mistakes, or if anything is unclear about the transfer, this could cause delays which could be difficult if business owners are trying to manage stakeholder expectations,” Bessie said.
“Often, there are a lot of layers that bank staff need to go through so any administrative mistakes will cause major delays.”
5. Make it easier for yourself
Take advantage of relevant finance technology to make your international exchanges as simple as possible. Airwallex, for example, helps you to avoid inflated bank and currency margins when making cross-border payments by enabling businesses to pay invoices in their preferred currency at the mid-market foreign exchange rate.
You're all set
This concludes our Ultimate Guide to doing business in China. You're now all set with the information you need to make the move and get started. However, this is where the hard work is just beginning.
As has been demonstrated, weaving a successful business in China can yield exceptional results, nonetheless, a large amount of research and planning is required before you open up shop across the pacific. Arm yourself with the right support on the ground, accumulate a solid knowledge of the regulations, and research the most practical payment methods, and just see how far your business can go.
It's a zài jiàn from us for now.