When one thinks of Australian goods sold overseas, products such as iron, natural gas and beef are likely to spring to mind. But beneath the commodities story lies another sector that is increasingly compelling: small businesses trading globally.
The change in total dollar value of imports and exports has trended upward in the past year for Australian small businesses, based on Xero data. It grew 27 percent month-on-month in May — the most in over two years — before slipping 2.6 percent in June.
When breaking down the numbers, it’s evident total import values have tended to climb faster than that of exports. Export values rose 15 percent in May, setting a nine-month high, and were little changed in June.
The small business figures provide a contrast to broader Australia. ABS figures show export volumes rose 2.7% during the three months to June, almost twice the pace of import volumes. Outbound shipments were helped by stronger demand for iron ore, natural gas and non-rural goods, according to the Australian Associated Press.
James Cashat owns SHOC, a Melbourne-based small business that trades almost entirely overseas. It makes optical visors for US football and lacrosse helmets. NFL stars including the Oakland Raiders’ Marshawn Lynch and the Washington Redskins’ Terrelle Pryor wear the iridescent visors.
More than 90 percent of SHOC’s customers are in America, which means Cashat’s revenue arrives in US dollars. His suppliers also request payment in US currency. That’s one of the reasons his accountants at Suntax suggested he use Xero.
“Paying in Australian dollars is dangerous because of the exchange-rate fluctuations,” says Cashat. “Xero’s currency function constantly updates the exchange rate, and the changes are reflected in my financial position. I know exactly what I’m making in Aussie dollars.
Xero is set up to give small businesses many of the same benefits that large enterprises enjoy in trading globally. Xero’s multi-currency function has exchange rates for over 160 currencies that are updated every hour from XE.com. Small businesses can set up accounts, run reports, invoice customers, and take payments in foreign currencies.
“Sales transactions come through, and I sit there in my spare time and reconcile them on my phone with Xero – bang, bang, bang! Easy,” says Cashat, whose business is in its fourth year.
A foreign-currency summary report shows an overview of FX exposure along with realized gains and losses, and bank account revaluations. This takes away complicated reconciliations and exchange-rate guesswork.
Cloth Concepts is a fabric-development company based in Alexandria, New South Wales. It serves fashion designers and labels in Australia and abroad, and employs seven people. About a third of its business is delivering to overseas locations such as factories in China.
“Pricing is one of our biggest challenges, and that’s significantly affected by the fluctuation of the Australian and U.S. dollars,” says Director Parry Laxman.
Cloth Concepts uses currency forecasts and some hedging, and relies on Xero’s multi-currency accounting tools for a real-time picture. The software converts foreign transactions into local currency and updates exchange rates hourly, offering instant insight into how currency gains or losses are impacting cash flow.
“We also just switched over to NAB banking, which has been really helpful. We’re getting bank feeds and transparency on the currencies we deal with,” says Laxman.