Manufacturing - A look inside

A well-established manufacturer for the car industry in Bridgnorth has a turnover more than £40 Million and exports many of its products to clients throughout Europe.

After a free, in-depth review we were able to provide a time and cost-saving solution to a well-established manufacturer in Bridgnorth, Shropshire.

Background

A Bridgenorth Manufacturing Company

The companies clients agree a price in Euros for the consignment at order placement.

On completion of the order and delivery, the client will pay the invoiced amount to the manufacturing company.

The Manufacturing Company will convert the Euros back to Pounds Sterling through their banking services provider.

This is done over the phone where the finance director will look to book the trade on the rate of exchange offered.

The bank sends the GBP back to the client at some point.

After analysis of the firm’s foreign exchange execution the average spread from the inter-bank rate was 0.32%. The Finance director was happy with the service and felt that they were getting a fair exchange rate on their currency contracts.

Based on their average monthly foreign exchange deals the manufacturing company was spending more than £90,000 per annum on their conversion costs.

Issues

• Currency volatility will often cause potential slippage when invoicing in Euros and converting the payment to GBP, the difference in exchange rate from when the contract is agreed could be very different to the rate at settlement

• The Manufacturing Company will receive payment of their invoices to their NatWest Euro account this incurs unnecessary cost and friction

• The Manufacturer currently manages its cash flow through the overdraft facility provided by NatWest, it is important to the manufacturer that conversion payments are remitted to their UK bank account on time to prevent incurring additional fees or delaying other payments.

• When booking the Euro to GBP conversion the Finance Director needs to call NatWest to get a quotation and book the deals over the phone. NatWest will book the trade and charge a transaction fee to process the currency conversion and payment to the GBP Bank account.

The Solution

• PathFinder FX service providers have a direct link to the wholesale rates for foreign currency exchange, the manufacturer was able to access real time pricing 24/7 with complete transparency on costs via our online platform.

• To take out the market risk of the Euro moving against GBP when the manufacturer agreed the contract payment terms they were able to secure the rate for when the delivery of the euros was made by the client at contract end therefore eliminating the FX exposure risk completely and protecting their profit margin.

• Due to the boutique nature of our business, we were also able to provide a standard spread of 0.15% for all their currency deals, this reduced the annual foreign currency conversion costs by more than half, from £90,000 to £40,000.

At PathFinder FX we pride ourselves on the quality of service and our understanding of the foreign currency market.

Book a call with Tom to see how our online platform

• Can give you competitive rates.

• Provide visibility of your incoming and outgoing international payments.

• Allows you to set up forward contracts should you wish to mitigate your risk against forex volatility.