TLDR: ABC Auto Fleet's $16K Annual Savings Journey with Finofo
ABC Auto Fleet, an Edmonton-based auto enterprise, was stuck in a financial rut. Their cross-border transactions were a mess, with checks from the US taking a week to clear, tying up crucial funds and slowing down their operations.
Finofo's Smart Solution:
- Streamlined Transactions: Finofo stepped in and changed the game. We set up a US bank account for ABC Auto Fleet, turning a week-long wait into instant transactions.
- Efficient Currency Conversion: No more losing money in currency exchange. Our platform made USD to CAD conversions smooth and cost-effective.
- Operational Ease: Our intuitive system meant ABC Auto Fleet could handle their growing business without breaking a sweat.
- Cost Savings: We're talking big numbers here. ABC Auto Fleet saved $1,300 annually on mailing fees alone, not to mention the time and hassle saved from bank visits.
- Eliminating the Float Cost: That 7-day delay was costing them a whopping $16,438.08 annually. Finofo wiped that out.
- Market Agility: With faster access to their money, ABC Auto Fleet could buy trucks quicker, making them a force to reckon with in the market.
The Bottom Line:
Finofo didn't just save ABC Auto Fleet money; we turbocharged their operations and set them up for a future of growth and success in the competitive automotive sector.
Dive into the complete details of the case study here:
Bridging Automotive Markets Across Borders
ABC Auto Fleet, a rapidly expanding automobile buying and selling enterprise, has been navigating the complexities of cross-border transactions with remarkable agility. Based in Edmonton, Canada, their business model focuses on acquiring trucks in Canada and distributing them across the United States. Despite their success, the company faced significant challenges in managing their financial operations, particularly in handling cross-border receivables.
The Roadblocks in ABC Auto Fleet's Financial Path
At ABC Auto Fleet, the financial workflow is deeply intertwined with its operations in the US market. Matt Henry, the company's director, provides insight into their process.
" Our core customer base, mainly auction groups in the USA, sends us payments via checks. These checks, usually ranging between $250k to $300k every week, are subject to a five-day clearance delay at our Canadian bank. Adding to this is the time for FedEx delivery, which means it takes about seven days in total before we can convert the funds from USD to CAD."
Matt Henry, Director at ABC Auto Fleet
This method, while streamlined for customer ease, presents its challenges. Matt Henry emphasizes the operational impact of this delay, "The week-long wait before accessing these funds affects our liquidity and operational efficiency, especially considering the high value of these transactions.".
This 7-day delay has a direct cost to ABC Auto Fleet resulting in USD 16,438.08 in lost profits primarily due to inability to access their earned receivables1. This cost does not even account for the opportunity cost associated with lost business opportunities due to the lack of available cash flow caused by this delay.
The physical aspect of this process was another hurdle. ABC Auto Fleet had to physically deposit these high-value checks at their Canadian bank branch, as they were issued by a US bank and could not be processed through mobile deposits. This not only consumed valuable time but also added an operational layer that was far from efficient.
Moreover, the company's inability to open a US bank account due to the lack of a US entity further complicated their financial operations. Even if they had the option to open a US account, transferring funds back to Canada would involve international bank wires, adding to the complexity and cost.
Finofo's Intervention: A Game-Changer for ABC Auto Fleet
Finofo's introduction to ABC Auto Fleet's financial operations marked a significant turning point. Our platform offered a comprehensive solution to the challenges they faced:
Streamlined Transactions: With Finofo, ABC Auto Fleet now efficiently collects payments through their own US bank account, provided via Finofo's platform. This account, in ABC Auto Fleet's name with unique local bank account details, has significantly streamlined their transaction process. The shift from physical check deposits to this system has reduced the time lag from seven days to almost instantaneous transactions, enhancing both operational efficiency and financial liquidity.
Efficient Currency Conversion: Our platform facilitated seamless USD to CAD conversions without the hefty FX spreads. Finofo's smart, algorithm-driven flat pricing brought a new level of financial clarity. This not only preserved ABC Auto Fleet's profit margins but also enhanced their financial efficiency.
Operational Ease: The intuitive system of Finofo allowed ABC Auto Fleet's finance team to manage the increased workload with greater efficiency, proving that rapid growth and operational ease can coexist.
Cost Savings: The partnership with Finofo led to substantial cost savings for ABC Auto Fleet. Firstly, by eliminating the $25 weekly mailing fee for customers, the company saved $1,300 annually. Additionally, the reduction in the need for physical bank visits not only saved time but also operational costs. Most significantly, by addressing the 7-day delay in receivables, Finofo helped ABC Auto Fleet avoid the annual float cost of approximately $16,438.08.
Market Agility: With quicker access to funds, ABC Auto Fleet could reinvest in purchasing trucks more rapidly, enhancing their market agility and ability to seize timely opportunities.
Driving into a Prosperous Future
With Finofo at the helm of their financial operations, ABC Auto Fleet is now better equipped to handle the demands of cross-border transactions. The collaboration has not only streamlined their international receivables and currency conversions but also positioned them for accelerated growth and expanded market reach. As they continue to navigate the competitive automotive sector, ABC Auto Fleet can now do so with a robust financial platform that supports their dynamic business needs.
1 The calculated cost of USD 16,438.08 due to a 7-day delay in receivables is based on the 'float' concept.
The formula used is: Float Value = Average Weekly Receivables × (Annual Yield/365) × Delay in Days with an average receivable of USD 275,000, an annual yield of 6%, and a 7-day delay.
The annual cost is the weekly float value multiplied by 52 weeks. This figure excludes additional opportunity costs from delayed cash flow.