Success Stories

Identified issue: Cash sitting in 20+ bank accounts under one bank was not generating any return. At the same time, an IPO was in the horizon and IPO proceeds were expected to land upon completion of IPO.

Solution and results:

Shopped around and negotiated with multiple financial institutions ahead of the IPO. Ended up implementing a deposit interest arrangement with the partner bank that generated C$3 million of cash interest income within a 3-year period of rising interest rates. The solution kept administration to the minimum while funds were fully liquid, and no other financial institution was able to beat the offer even with term deposits like GIC.

Background: A acquired sub generated 80% of its C$50 million revenue in foreign currency USD and had 90% of its spending in local currency CAD. That sub only carried CAD bank accounts to lower account fees and administrative burden.

Issue#1 customers paying USD into CAD denominated bank accounts is a more expensive way to convert USD to CAD. Correspondent banks take heftier cut on FX conversion than your bank ranging from 3% to 5%.

Issue#2 another acquired sub needs USD to fund its operation.

Issue#3 AR receipt application was more manual as ERP requires a workaround when receipt currency and invoiced currency are mismatched.

Underlying issues: The Finance in-charge unknowingly prioritized accounting administration and easily measurable expense line (i.e. bank fees) over the larger impact FX conversion cost buried in FX gain/loss.

Solution and results:

USD accounts were opened to allow receipt currency to match invoice currency to simplify administration. The previous correspondent bank cut of 3% to 5% on conversion were eliminated, bringing in additional C$1.6 million to cash and to bottom-line. Furthermore, natural hedge was optimized as only the required amount of CAD would be converted from USD. The saving impact was C$1.2 million (about 4% of spread on C$30 million) annually. Additional bank account maintenance fees were nominal at around C$5k. Overall, a total saving of C$2.8 million on C$50 million annual revenue.