Navigating cash flow uncertainty
For 35 years, National Resources has sourced and supplied local Australian manufacturers with an extensive range of specialist products from around the world. The business has long served the industrial, building, and health industries by trading in rolled aluminium, flexible packaging, PVC films, and medical products.
Across its global supply chain, National Resources annually sources 233 products from 139 partners in 22 countries. Each supplier is carefully selected for its superior quality standards and responsiveness. Inventory distribution begins in its large warehouse in Victoria and is then routed through storage and logistics networks across Australia.
Maintaining a complex supply chain while driving the business’s financial performance relies heavily on cash flow management. National Resources Managing Director Leon Cox says that having access to working capital to bridge any delays in cash conversion is vital.
“Working capital is critical to our business. We buy materials from overseas suppliers and pay when the goods are shipped. It’s on the water for 30 days, and then we offer customers terms of trade locally. That’s a transition period between 90 and 150 days between paying for goods and being paid ourselves when we need money upfront.”
Navigating a multi-faceted liquidity crunch
Leon says that during 2022, demand for National Resources products surged as customers stockpiled materials amid ongoing disruption. The business increased its on-hand inventory to keep pace with customer requests, and cash flow pressure also arose from increased shipping lead times and rising commodity prices.
At the same time, changing terms of trade from overseas suppliers exacerbated the business’s liquidity issues. Leon says that following a broad-based tightening of credit facilities among suppliers, National Resources went from paying for goods when shipped to being forced to send a 30% deposit when ordering.
“We’d be sending money to our suppliers 45 to 60 days before anything was shipped and tying up a significant amount of cash in deposits,” Leon said. “To address these issues, you must make amendments to how you do business, how you pay overseas suppliers and give terms of trade to local customers.”
“Finding new and efficient ways to access working capital and free up cash is vital to that equation. We knew we had to approach a bank and get some help.”
Solving cash flow issues with innovative structuring
Leon says that National Resources looked at how it could urgently improve its cash flow, realising the only viable way was to adopt a different borrowing model. “CommBank’s Working Capital specialists presented a lending model to us which was completely different to what we had seen before, and really, it solved our cash flow problems in one stroke,” he added.
For National Resources, the solution was CommBank’s Working Capital Facility, which unlocked the value of current assets on its balance sheet with the financing secured against the business’s receivables and inventory.
Supporting the business vision
Leon points out that while the structure of the lending facility is fundamental, so is the relationship with a banking partner. “The strength of that relationship depends on how well someone understands your business,” Leon says.
“As our business grew by 40% in 2022, we needed a partner to support us as we scaled up. The CommBank team turned up and spent weeks going through our numbers and cash flow. We didn’t tell them what sort of credit facility we wanted; they worked with us to determine what would best suit our needs.”
“When they left our office that day, we turned to each other and said, ‘That’s amazing’ They understand what we need. It was obvious that the team regularly deal with businesses like ours.”
The advantages of Working Capital innovation
CommBank’s team of working capital specialists developed a solution for National Resources that provides the flexibility and cash flow assurance to continue its growth momentum. That includes:
- Better management of cash conversion cycles in an evolving market, providing confidence to navigate cash flow uncertainty across its complex supply chain.
- Financing secured against receivables and inventory, creating liquidity from current balance sheet assets.
- The flexibility for the facility to encompass import-export trade facilities, structured letters of credit and bank guarantees.
To learn more about how CommBank can help your business’s cash flow, contact your Relationship Manager or talk to our specialists on 1300 654 112.
Things you should know:
This information is prepared without considering your individual and/or business needs and objectives.
Credit provided by the Commonwealth Bank of Australia. These products are only available to approved business customers and for business purposes only. Applications for finance are subject to the Bank’s eligibility and suitability criteria and normal credit approval processes. T&Cs fees and charges apply.
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