Don't let saber rattling shake your business

A recession is in full swing. A war on terrorism is under way. How should businesses deal with both?

Economists, analysts and small-business experts are using the U-word — "uncertainty" — in describing the most-distressing aspect of what lies ahead. Even so, they believe the resulting economic impact of a war will not be significant long term (bad or good), and urge businesses to resolve to get through these tough times. They feel the United States is in better shape today to endure the economic turmoil normally caused by a war, police action or whatever you want to call it.

The military conflict could even end up rallying the country, say some. "This will galvanize us, remove petty stuff from the headlines, and unify Americans," says Bill Dunkelberg, chief economist for the National Federation of Independent Business (NFIB). "That will only end up helping the economy."

Here are 10 general tips for getting your business through uncertain times, compiled from experts interviewed for this article. As you will notice, they don't advise hiding out in a cave, or even dwell on retrenching.

1. Stay as informed as possible about economic indicators and relevant world news. Knowledge is power in uncertain times; you need to make decisions with the best information available.
   
2. Take command of your costs. Small businesses can control spending much easier than large businesses. Now is the time to find areas to streamline, re-examine your spending priorities and justify new hiring, travel plans and major purchases.
   
3. Manage your cash flow aggressively. This point is forever made, in good times and bad. But poor cash flow is one of the biggest reasons businesses go under.
   
4. Don't overlook good opportunities for loans or bargains. Now might be a good time to negotiate a long-term loan or a line of credit for your business, says Bruce D. Phillips, the NFIB's senior fellow for regulatory studies.
   
5. Upgrade your technology security (and start backing up your data!).
   
6. Upgrade your technology, and make better use of the Web. Programs like Shipping Solutions export documentation software will help you get your work done more efficiently and more accurately.
   
7. Look into business-disruption insurance. For more information, check out this Chubb Corp. insurance portal for small businesses.
   
8. It's an employers' market again; don't be afraid to hire people. We've talked about bargains in technology; that goes double for job candidates right now. A lot of smart, talented people are looking for work.
   
9. Be visible — and patriotic. Use any extra time you may have to promote your business. Volunteering your time to business organizations and charitable causes, donating your products and services, getting involved in community events and supporting community activities all build good will that can benefit your business.
   
10. Maintain your sense of humanity. "Many people are going to be at wit's end in getting through this," says Burney of Cahners In-Stat Group. "Do what you can to help others cope."

This article was adapted from an article on the Microsoft bCentral Small Business Resource Center, (c) 2001, Microsoft Corporation.  All rights reserved.

When is a L/C confirmation not much of a confirmation?

By Chris Lidberg

Back when you were negotiating the terms of sale to a new client, you required a Confirmed Letter of Credit so you would limit your company’s risk to within the U.S. By asking for a Confirmed Letter of Credit, you thought you’d have all your bases covered. In anticipation of the LC, you began the initial steps necessary to ship your product overseas.

Finally the Letter of Credit comes in and the advising bank has added their confirmation. With the Confirmed LC in hand, you are ready to ship.

But wait! Who is the advising bank that has added their confirmation? If it’s a branch office of the issuing bank that just happens to be located in the U.S., should you be concerned?

Let’s step back and re-examine the reasons you wanted a confirmed Letter of Credit in the first place.

You may not have been comfortable with the buyer’s country due to political unrest or deteriorating economic conditions. Or maybe you had never heard of the bank that would be issuing the LC for the buyer or, if you know the bank, you weren’t comfortable with them due to their financial condition. These are all good reasons to ask for a confirmation.

When a Letter of Credit is issued, it is extremely likely that they will advise the Letter of Credit through their office in the U.S., if they have one. They do this to keep the income stream flowing to their own bank. In addition, if the buyer tells their bank that the seller wants a Confirmed Letter of Credit, the issuing bank will only be too happy to have their office in the U.S. not only advise the LC, but add their confirmation as well.

If this has happened to you, you still have foreign risk despite the fact that you are holding a Confirmed Letter of Credit. The foreign office of the issuing bank located in the U.S. is only as strong as the issuing bank, and the issuing bank is still subject to the political and economic conditions present in their country. In other words, you are paying a confirmation fee—which can be substantial—and not really getting much for it.

So how do you avoid this type of situation?

Back during the negotiation process when you tell the buyer you are going to require a Confirmed Letter of Credit, give the buyer a list of banks located in the U.S. that you would find acceptable as the confirming bank. You should insist that under no circumstances whatsoever would you accept a Letter of Credit confirmed by any office of the issuing bank. You might also tell the buyer that if the Letter of Credit ends up being confirmed by a bank that is not on your approved bank list, the LC may be rejected.

Always remember that just because you have a Letter of Credit in hand, that doesn’t mean that payment is automatic. Read the LC. If there is something you are not comfortable with or don’t understand, call the bank to which you are going to present documents for advice and clarification.

Keep in mind: Your ability to get paid may well depend on your ability to present compliant documents to a bank that you know and trust.

(c) 2001 InterMart, Inc. All rights reserved.

Chris Lidberg is an independent consultant in the area of international banking and Letters of Credit.  Ms. Lidberg has more than 25 years of international banking experience, most recently as Vice President at U.S. Bank where she was part of the International Trade Services Division.  She was responsible for selling the bank’s international products to both customers and prospects, and conducting Letter of Credit seminars.

During her 25 years in banking, 15 of those years were spent in the Letter of Credit area, holding various supervisory positions, later to manage the Letter of Credit department.  MS. Lidberg went on to become the manager of International Operations where she was responsible for managing not only Letters of Credit, but also International Collections, Money Transfers, Cash Letters, Investigations and all Telex and SWIFT activities for the bank.  Ms. Lidberg is currently partnering with U.S. Bank to provide full day Letter of Credit seminars.