Closing the cash flow gap

Forest Dermatology was a thriving skin care business with five clinics in Melbourne and its own range of skin care products. But Forest Dermatology risked becoming a victim of its own success.

Following rapid growth, the business faced three related cash flow problems:

• It was increasingly difficult to keep track of expenses across all five clinics.
• The ingredient suppliers for Forest’s skin care range demanded payment in advance, while customers took up to 60 days after delivery to pay. That left Forest with a significant cash flow gap
• Forest had received an offer from a US department store keen to sell their range. They knew that they would need to start sourcing ingredients offshore — but were concerned about paying for imported goods, sight unseen.

How could they make the most of their growth opportunities without expenses spiralling out of control?

On the advice of their Relationship Manager, Forest Dermatology:

• Gave authorised employees at each clinic a Commonwealth Bank Charge Card. By channelling all expenses through a single card facility, they were able to keep tight control of expenditure.
• Set up a Receivables Finance facility, allowing them to access 80% of the value of a sale on the same day the invoice was issued. That meant they had the funds to buy ingredients and fulfil each order, without having to cover the cash flow gap.
• Used Letters of Credit for overseas purchases, ensuring that suppliers were only paid after they provided evidence that the goods had been shipped.

Thanks to the Business Charge Card facility, Forest Dermatology was able to streamline and centralise expense management, while slashing paperwork. CommBiz gave them complete control, with all transactions clearly recorded online and in paper statements.

The Receivables Finance facility allowed them to expand their manufacturing operation and buy the supplies they needed. They even took advantage of their suppliers’ discounts for early payment!

Using Letters of Credit both to import ingredients and to export products, they were able to expand the business offshore without taking on too much risk. And with CommBiz TradeXchange, they were able to manage and track Letters of Credit quickly and easily, 24 hours a day.

• This is a hypothetical example for illustrative purposes only and does not represent any particular individual or company.

 

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