Sherie Griffiths

July 28, 2009

“A Case Study”

More from Issue 9 of “Minimising Trading Risks Abroad”, from Ray Stannard of International Trade Financial Solutions

http://www.inttradefinsolns.co.uk

 

Tomorrow, “Foreign Exchange Options?”.  Today, a Case Study.

 

No names, etc., but here’s an overview of an issue that I was recently asked for help.  A relatively new business, started up by a young woman who was born and brought up

in China, but had been in the UK for the past 12 years or so, was looking to expand and reduce overheads by importing directly from China as opposed to using a UK distributor.  Her main issues were that she would have the direct relationship with the manufacturer, how best to structure the deal from a cashflow point of view and foreign exchange

issues. 

The first was perhaps less of an issue, given her ethnicity.  Nevertheless, the need to undertake fact finding trips and to keep in regular contact is essential.  On the other 2 points, I explained the different options available [partly referring to the 'Risk Ladder' - which I talked about last month] and illustrated to her the effect on cashflow.  Typically, many Far East suppliers need funds ‘up front’ to allow them to manufacture.  Correct contract structuring at this point in the process can often avoid any physical cash prepayment, which is important. 

Buying in US Dollars and selling in Sterling meant that she had to keep an eye on her expected profit margin from the whole deal, so we discussed how she could do this whilst retaining

some flexibility to allow for delays in shipment, etc.  All in all, over the course of a couple of weeks [not intensive], she was able to decide how best to structure

this particular opportunity to the benefit of both her business and that of the seller.

If this sounds like something your business, or someone you know could benefit from, let me know.

May 26, 2009

Planning Your Foreign Exchange Strategies

What follows is an extract from the newsletter produced by Ray Stannard at International Trade Financial Solutions – one of our professional members.  Ray specializes in helping SMEs minimize their trading risks overseas.  http://www.inttradefinsolns.co.uk

 

“Whenever you trade overseas – be it buying or selling – or even, if you’re one of the growing number who trade purely within the UK but do not use Sterling as a settlement currency, don’t overlook the need for a suitable foreign exchange strategy as part of your overall plan.  Many businesses were caught out at the end of last year when the Pound went into freefall against the US Dollar and euro.  Those importing found that their profit margin was eliminated, and more, in some cases by the rate movements.

As a result, many small businesses failed – and this without all of the other issues that are currently around.  Being aware of the risks and knowing what options are available to you before you sign deals will help you overcome many of these problems and allow you to crystallise your profit margin, either in whole or part.  There’s no one, simple formula; every business will have slightly differing issues to address, but, if you are uncertain of your choices, then seek outside help sooner, rather than later.” 

 

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