The recently formed international trading company had grown very quickly from a standing start and the business needed to fund significant further growth, ensuring it maintained sufficient working capital for the projected higher level of trading activity. An additional element to financing was that trading transactions were multi-currency, involving sterling, euros, and dollars, so there was a requirement to mitigate foreign exchange risk as well.
In the initial growth phase, the business had used standard accounting software coupled with a bespoke operational trading system to track bulk and container movements. It was therefore key to ensure these systems were integrated as comprehensively as possible with finance so that the stock and currency positions were recorded and monitored on an ongoing basis.
The forward plan and budget set out a near doubling of trading activity with increased stock levels and additional geographical spread, so it was key to bring in additional finance streams particularly to cover stock during the extended shipping period from the Far East to Europe.
Identifying all available financing options from this exercise and then selecting and delivering the right structured solution. Ensuring that the core entrepreneurial trading of the business was able to flourish across differing international markets and trading conditions, producing higher bottom line profit.
The importance of putting together a credible and robust stress tested forecast accurately highlighting the cashflow impacts of the projected increased trading activity was a requirement, and then working with finance providers so this was fully understood and accepted was paramount to delivering the successful outcome. Alongside this, additional weekly and monthly reporting and KPIs needed to be introduced so that performance to forecast target was measured and, if circumstances arose, remedial action could be taken quickly and effectively in-year.
Firstly, a detailed forward integrated forecast, highlighting cashflow and financing requirements, was put together to establish the projected overall cashflow position throughout the following year.
Alongside this forecast, an initial review took place of all available finance options, including invoice finance, trade finance, foreign exchange, and overdraft/loan facilities. This was followed by a detailed bench-marking exercise involving a short-list of alternative providers to identify the availability and flexibility of each offering as well as obtaining the best facility match and competitive charges and interest rates.
A new flexible finance package was negotiated and put in place at competitive terms, with the incumbent allowing continuity of the existing banking relationship. The business obtained the necessary finance capacity to be able to trade and fund higher volume deals with procurement driven beneficial margin impact.
Improved cost variance & stock monitoring ensured accurate margins were being reported on an ongoing basis via the MI reports. Additional forward forecasting was introduced to identify & mitigate foreign exchange risk.
The profitability of the business increased strongly enabling it to commit to further expansion.
EFM Expert: Jonathan Drew