If you have a website, your business can be viewed around the world — but you may not be prepared for orders from overseas. Kate Horstead finds out how to deal with purchases from international customers, and how you can use the opportunity to expand
Although exporting is less complicated than many small businesses think, processing overseas orders without taking certain steps could result in losing money or breaching your legal obligations.
Vet your overseas customers before you export
The first thing you should do if you receive an overseas order is verify the customer's contact details.
"It is essential to get in touch with the buyer, to check they are genuine," says ecommerce expert Maggie Choo.
"A lot of businesses get over-excited when they get overseas orders, and don't do any due diligence," she adds. "This could leave you with nothing to show for the product you've sent."
Email them your terms and conditions — for example, you could ask for 30% of the payment before you send the product, and 70% on receipt.
"As long as you use a secure payment method, this should be fine for overseas customers, too," adds Choo.
"I'd suggest using PayPal or bank transfers. Be clear on what currency you'll accept, as exchange rates fluctuate and you could lose out if the customer chooses to pay in a currency that is more favourable to them — but if you agree a price in writing, they are locked in to that."
You should also make it clear that they are responsible for paying any import charges.
"When you post the item, opt for a tracked delivery service so the customer can log in to see where it is," suggests Choo.
Check your legal obligations when exporting
Next, consider the legal implications of selling overseas. These will depend on what you are selling and whether or not the order has come from within the European Union (EU).
If the customer is EU-based, you need to observe the VAT rules and enter details of exports on your VAT return. The VAT situation can be somewhat complicated, depending on what you sell:
- If you sell goods, you don't normally have to charge VAT. If your customer is VAT-registered in their country, you may need to include their registration number on your VAT return.
- If you sell services, you must normally charge VAT at UK rates when selling to non-business customers. If you sell to a business customer, you don't generally need to charge VAT.
- However, the rules are different for some types of service, including those that are supplied electronically.
If you have any questions about whether to charge VAT, you can check with HMRC's VAT helpline on 0300 200 3700. You only need to declare export sales to the EU once they reach £250,000 a year.
If your customer is outside the EU, you must report sales via the electronic National Export System, a computer-based method of declaring exports to customs.
"If your transactions are transparent, you haven't got anything to worry about," reassures Choo.
For certain products, including technology, plants, art and specific food products, you need an export licence so you should check if you need one first.
Growth in new export markets
After receiving an unexpected overseas order, you could use it as an opportunity to enter a new market. However, ensure you assess your potential first, as exporting on a larger scale is an investment.
"There are free resources, for example the UKTI and the BCC run schemes to help you research new markets," says Choo. "And you can use web analytics tools such as Google Analytics to see where your website visitors are based."
You could also contact your local chamber of commerce and ask them to put you in touch with the chamber or embassy in that country. "The Government sees exports as a growth engine, so there's plenty of support available," says Choo.
Choo adds that small firms should not be daunted by exporting. "It really isn't very different from trading locally," she concludes. "You just need to be diligent, because of the distance, and be clear about your terms."