How We Help Importers – A Scenario
Posted Under: News
Imagine you’re the CFO for a company that imports raw materials from Germany, UK, and China. These materials are used to manufacture wind turbines in Memphis, TN.
90% of the finished goods are sold domestically in the USA, with the remaining 10% being exported to Denmark and Australia.
The procurement team has a healthy budget, and you’re still concerned about eroding profits. Some months you see the company achieve your sales plan, but what you may not have realized is that you could have generated more income.
Your company has banking relationships with a regional bank as well as a global bank, both of which have branches close to their office and factory. Through these banks, you are able to send euros to Germany, British pounds to the UK, but send USD to China.
Not realizing that many regional banks have poor margins on FX payments and the larger global banks are keeping margins wide because they rely on customer apathy, you’re missing out on tens of thousands of dollars in profit.
In addition, you’re not getting the level of guidance from your bank that you deserve and need in order to operate more efficiently. As a result, you were never advised that it’s likely the Chinese exporter is ‘padding’ (increasing) the invoice amount because they have the FX risk, meaning your company is overpaying by settling their invoices in USD.
By switching your payment flows to GreenShootsFX, you’re able to get a better EUR and GBP FX rates saving circa $2,500 for every $100k you had to send to international exporters.
Moreover, you now have access to Window Forward FX rates so you’re able to successfully hedge the next 12 months of payments. With a weakening USD, this meant you reduced expenses significantly and had an awareness of your cash flow for each month.
And, by switching their Chinese invoices from USD into CNY, the exporter was relieved not to have FX risk (given they were being paid on 90-day terms). Consequently, invoicing in CNY resulted in a lower USD paid amount through GreenShootsFX.
You increased revenue and had less reliance on bank credit facilities to support cash flow, further reducing expenses.
Don’t continue making choices that cost you. Call us today to learn how you can generate more income.