Home' Australian Automotive Aftermarket Magazine : Australian Auto Aftermarket e-Zine - Feb 13 Contents AUTOMOTIVE AFTERMARKET MAGAZINE FEBRUARY 2013 41
An innovative company that designs,
manufactures and distributes automotive
performance parts, Turbosmart has been
operating in Australia for more than 15
years and in the last few years has seen
tremendous growth in the USA.
Being a company that imports and also
exports, it has two-way currency flows,
which means the company has a need to
both buy and sell foreign currency.
Turbosmart is an active foreign
exchange participant to the point that it is
constantly involved with foreign currency
trading, almost on a weekly basis.
As the business continues to pursue its
overseas expansion focusing more on
exports, Ms Wan said "minimising the FX
risk would inevitably become one of the
most important parts of the business
strategies in the near future".
While there are many ways to minimise
FX risk, some that can be quite complex,
Turbosmart prefers to keep things simple.
It aims to "match any outgoing foreign
currency payments against foreign
currency inflows received".
Because the company has two-way
currency flows, it can net inflows with
So while Turbosmart has payments to
make in USD, it can offset some of these
outflows with USD receipts, in effect
minimising the need to cross spreads (buy
and sell USD) which also comes at an
added cost to the business.
To do this the company has to have its
own foreign currency bank accounts so it
can hold on to USD receipts and use them
to pay suppliers as the need arises.
While there are advantages in this
approach and it is common amongst
businesses with two way flows, it may not
be feasible for companies that only receive
foreign currency sporadically or for very
small amounts as the costs to maintain a
foreign currency bank account can be
Quite often these types of businesses
have a timing gap between foreign
currency inflows and outflows which still
carries FX risk and it is common,
depending on their risk appetite, to hedge
some or all of this gap with the use of
forwards or options.
Ms Wan seems to sum it all up quite
"FX risk should not be neglected in
today's business world," she said.
"Having identified and measured the
potential exposure, business should also
determine the risk appetite of its key
stakeholders such as directors.
"This will help to determine which
method would be the most appropriate to
manage such risk."
To find out how your business can minimise
the impact of foreign exchange, contact
Paul Candelori from OzForex on
02 8667 9117.
Minimising the impact of foreign exchange on a business
OzForex has drawn on the experiences of Turbosmart Finance Manager, Anya Wan, about the
business and the impact foreign exchange has on its operations.
Accurate analysis and reporting
A robust monthly profit and loss and cash flow analysis is vital
to reveal your business's true position at the end of each month --
it helps you understand your current debt position and obligations
to determine the current profitability of your business.
Train staff to bring in the cash
Train and reward your staff for boosting sales and collecting
payments on time -- sales and collections need to work together.
Develop a collection plan
Develop an action plan for overdue invoices. Try to understand
your customer's situation and carefully balance the need to receive
payment with your relationship with your customer.
Easy payment options for your customers
Give your customers a variety of simple payment methods to
make it easy for them to pay on time. Offering a choice of payment
options, whether they be EFTPOS, BPAY, over the phone or the
ability for your customers to make payments to you online will help
you get paid faster.
Give discounts to customers for early payments
Always be consistent in your actions. You could send mixed
messages if you sometimes ignore late payments and at other
times take a harder line.
Manage your finances online
Managing your everyday business transactions and finances
online will help reduce staff administration and simplify payments,
giving you greater control of your business.
The golden rule in debt collection is that the sooner you chase the
debt, the more likely you'll get paid
You need a system that will alert you early to overdue debts.
Talk to your banker
Talking to your business banker can help you get through a cash
For more tips and insights from NAB on managing your business
cash flow and business finances visit business.nab.com.au
Tips to avoid cash flow problems
NAB Executive General Manager Small Business, Cindy Batchelor, has offered the following tips
to avoid cash flow problems.
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