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Tag >> trade finance
With costs varying greatly for different bank services, companies are seldom given insight into what drives their banks’ fee structures and often can feel held hostage to high bank fees with no mechanism to address it.
Particularly since the crisis began and liquidity became tight, companies have often focused more on simple liquidity availability than in bartering for the best fee structure for that access to capital.
Deutsche Bank has launched a web-based trade finance tool for trade guarantee management. The syndicated guarantee management tool allows companies, syndication banks, and agents to access information on guarantee transactions and capture instructions in real-time, and automate information transfer.
It includes extensive reporting functions, customization, and is fully integrated with Deutsche Bank’s other corporate client solutions.
Outsourcing part or all of the trade finance function—and the supply chain—can provide great reward to the average corporate. Most big banks, along with many smaller service providers and trade-related market players, offer such services for corporates.
Companies are increasingly looking to hand off the parts of this function that are not essentially held in-house.
One big outcome of the crisis is that most finance and treasury teams at any and every size of business now work many more hours than they did before, and wear many different hats than they used to.
With so much focus on improving working capital management and reducing costs in the working capital chain, this put increasing pressure on the CFO and their finance team to build up additional skill sets that may or may not have had anything to do with their previous job function.
The biggest transaction banks are on their way to providing fully integrated working capital solutions, but they still have some ways to go—particularly in terms of systems and processes integration.
Even before the crisis, companies recognized the importance of integrating trade, the supply chain, and cash management to have a holistic view on working capital across the organization.
Republished from the Benche, a financial community for corporate treasurers.
The International Chamber of Commerce has released the findings of their survey titled "Rethinking Trade Finance 2010" that sheds some light on this issue.
While there has been a lot of talk about end-to-end financial supply chain solutions, few systems really live up to the hype. Some companies have chosen to cobble together a number of systems, and some banks are partnering with third party providers to provide a complete end-to-end solution for receivables and payables management, payments and financing.
These banks are looking to technology partners to provide the electronification of payables and receivables documentation and information flow, and then the bank provides the payments and settlement piece, plus access to financing for both supply chain finance programs and trade finance needs.
Following on from Tuesday’s blog, the recent crisis put into sharp focus the importance to companies of ensuring the financial soundness and liquidity of their suppliers. To this end, many companies have chosen to help their suppliers get access to bank liquidity that might not be available otherwise.
By setting up a supply chain financing program, a financial institution or investor agrees to buy discounted receivables from a company’s suppliers and then waits to receive full payment at the end of the payment cycle. The supplier can get paid by the participating financial institution on, say, Day 4 of the cycle, and then the bank receives payment from the buyer according to the agreed payment terms – say Day 75 or Day 120.
As trade counterparty risk increased and liquidity became scarce during the global economic slowdown, many companies revamped their trade finance tools in order to better manage that risk and ensure the smooth flow of goods internally and externally for global operations. Traditional risk-mitigation tools, such as letters of credit (LCs) and agency guarantees, once again grew in popularity for trade within both developed and less-developed countries, as we pointed out here . In addition, corporates generally invested more in software tools to help control trade documentation and trade finance management.
But the biggest changes have been made on the banking side, as financial institutions increasingly recognize that trade finance desks can no longer operate in a silo. Many banks have reorganized their trade finance functions to integrate them with cash management, payments, and collections in order to help companies manage their supply chains from end-to-end.
There has been a lot of talk in the press around the dispute between the US and China over the value of the yuan. But what it really signals for US companies is not that the cost of selling foreign-made goods is likely to rise, or that US-made goods are losing a competitive advantage to China. Rather it demonstrates the importance of actively managing the physical and financial supply chains.
Yes, the yuan is being held at a rate that is undervalued by about 20 percent, according to economists. That potentially means goods manufactured in China are more competitive in global markets than US goods. Yes, too, currency movements have an impact on the cost of buying and manufacturing goods abroad. In fact, a number of large retailers that source goods in China – including Wal-Mart, Target, and Costco - saw their cost of goods sold rise in the latest quarter over the same period last year. But that is affected by many global and domestic factors, including transportation and storage.