Streamlining Procurement and Taxation Strategies in the Trading Industry

In an exclusive interview with Industry Outlook Magazine, Sanjay J. Patel, Managing Director of Tembo Global Industries, shares how trading companies can tackle supply chain disruptions during economic uncertainties, especially global crises. He also touches upon the accounting side of the import/export businesses. He has around 38 years of rich and vast experience in trading, wholesaling, exports and imports of engineering goods, pipes, fittings and general items.

What are the most common taxation challenges faced by trading businesses, especially those engaged in imports and exports?

One of the primary concerns is navigating complex customs regulations and tariffs, which vary across countries. Ensuring compliance with varying VAT and sales tax rules is also challenging, especially when dealing with cross-border transactions, as export exemptions and import VAT requirements differ by jurisdiction. Transfer pricing is another issue, as it is crucial to adhere to international standards for intercompany transactions to avoid audits and penalties. Currency fluctuations further complicate tax planning, as exchange rate changes impact both the valuation of goods and the tax treatment of profits. Additionally, double taxation, changes in trade policies, and new tariffs can create unexpected costs. Managing comprehensive documentation and staying updated on anti-avoidance rules are also key to avoiding penalties and maintaining compliance with global tax standards.

How do global supply chain disruptions impact procurement strategies, and what steps can businesses take to mitigate risks?

Global supply chain disruptions have significantly impacted procurement strategies, causing delays, increased costs, and uncertainty in inventory management. These disruptions often result from factors like geopolitical tensions, natural disasters, or logistics bottlenecks, forcing businesses to reassess sourcing and inventory strategies. To mitigate risks, companies can diversify their supplier base across different regions, reducing reliance on a single source. Strengthening relationships with key suppliers and adopting more flexible contract terms also helps manage uncertainty. Investing in technology, such as supply chain management software, can enhance visibility and improve decision-making. Additionally, maintaining buffer stock and exploring alternative transportation routes or methods can help minimize the impact of disruptions on production schedules and customer fulfillment.

What financial management practices are critical for maintaining liquidity in trading operations with high product diversity? How can they guard against financial risks such as currency fluctuations and credit defaults?

Effective financial management is crucial for maintaining liquidity in trading operations with high product diversity. Key practices include closely monitoring cash flow, optimizing working capital, and maintaining a balanced inventory to avoid overstocking or stockouts. Regular forecasting and budgeting help anticipate liquidity needs and adjust procurement strategies accordingly. To guard against financial risks such as currency fluctuations, businesses should utilize hedging strategies, including forward contracts or options, to stabilize exchange rates. Additionally, diversifying suppliers and customers across different regions reduces the impact of credit defaults. Implementing robust credit management practices, such as conducting thorough credit checks and offering flexible payment terms, helps minimize bad debts and ensures smoother cash flow.

What procurement strategies can trading businesses adopt to remain resilient during economic downturns or supply chain crises?

During economic downturns or supply chain crises, trading businesses must adopt proactive procurement strategies to remain resilient. One key strategy is supplier diversification—ensuring that sourcing is not overly reliant on a single supplier or region. This helps mitigate the risks of disruptions caused by local economic or geopolitical issues. Additionally, forming strategic partnerships with key suppliers can help secure better terms and ensure priority access to critical goods during crises.

Building inventory buffers for essential products is another important approach to managing potential supply shortages. Businesses should also invest in advanced forecasting tools to predict demand fluctuations and adjust procurement schedules accordingly.

Furthermore, negotiating flexible contract terms, including price locks or clauses that allow for adjustments in response to market changes, helps protect against rising costs. Lastly, focusing on strengthening cash flow management and maintaining liquidity ensures the business can weather financial challenges during tough economic times.

What trends do you foresee in procurement and taxation that will most significantly impact the trading industry in the coming decade?

In the coming decade, digitalization and automation in procurement will drive efficiency, enabling real-time inventory tracking and smarter sourcing decisions. Sustainability will become a central focus, with businesses increasingly prioritizing eco-friendly sourcing and supply chain practices. In taxation, global tax reforms, including the implementation of minimum tax rates and stricter transfer pricing rules, will create a more complex environment. Businesses will need to adapt to these changes by enhancing compliance strategies and leveraging advanced technologies for better financial management and reporting.