Successful international business: Selmers and smart financial strategies

Selmers works closely with the bank to ensure smooth international transactions. According to David Steenvoorden, Finance Manager at Selmers, this collaboration is vital: “Our bank helps with legal analyses and coordinating payment conditions. This is a vital part of optimising the cash flow.”

Thanks to a strong financial strategy, Selmers operates confidently and successfully in 42 countries, including Germany, Mexico and India. Steenvoorden adds that the bank also provides support in drawing up complex Bank Guarantees: “ABN AMRO is always willing to look for customised solutions for our projects, which is great.”

Technological innovation is the key to Selmers’ strategy. Smart machines, such as systems for coating pipe seams and digital tracking systems, create added value for clients around the world. “We design machines, import all the components, and assemble them in Beverwijk. After they’ve been tested, we disassemble the machines and send the component parts in containers to clients.”

Flexible logistics play a huge part. In a recent delivery from Portugal, the machine was sent directly from the partner to the final client in Greece, which saved time and money. “As well as our innovative solutions, our clients also appreciate our flexibility in dealing with logistical challenges,” Steenvoorden continues.

If you ask Selmers, risk management is a question of preparation, communication and client contact. Steenvoorden cites two important steps:

1. Due diligence regarding clients “We visit clients at least twice and do a thorough check of their reliability. We sometimes ask previous clients about their experiences.”
2. Firm agreements When issuing quotes, Selmers makes firm agreements about deadlines, clauses and payment terms. This helps to avoid nasty surprises and creates a predictable framework for larger projects.

A recent order in Greece worth €7.5 million is a good example of risk management. Selmers used a standby Letter of Credit to limit the risks. A standby Letter of Credit works in much the same way as a Bank Guarantee, in this case as an advance payment guarantee. The client pays in advance, but is given a guarantee that they will get their investment back if Selmers fails to deliver.

“It takes quite a long time to draw up these guarantees. The Greek client suddenly wanted the standby Letter of Credit to be made out in a different name. Confirmation through Swift took another four weeks. You need good working relationships with the suppliers to manage the risks in the supply chain.”

Letters of Credit (L/Cs) are essential when Selmers commits to major projects with clients who only pay on delivery. An L/C gives Selmers the guarantee that a bank will pay as soon as the conditions of the L/C are met. Steenvoorden explains how this works: “The client comes to Beverwijk to check that the product satisfies their requirements. We receive the documents once the machine has been handed over to the carrier. We finalise the details of the L/C through the bank, and payment follows.”

However, this also presents challenges. It can take time to reach an agreement with a client about the conditions of the L/C. This delay can affect the start of the production process, as production will only commence once the L/C has been finalised and received. “You sometimes get into lengthy discussions about the L/C. In some cases, it can take months to complete negotiations.”

Steenvoorden is also keen to stress that every detail counts: “You can’t afford to have any mistakes in the documents. Even the tiniest of anomalies can cause a delay.”

Cash flow is an important factor for Selmers when doing international business. Larger projects are often paid in instalments:

• 30% advance payment: for purchasing and assembly.
• 70% afterwards: on delivery and acceptance.

Selmers also applies other payment conditions.

• Payment terms are linked to milestones in the project.
• Monthly instalments boost the cash flow.

Steenvoorden wants to share a few valuable tips for business owners who plan to expand their international activities:

1. Communicate with your bank
   Talk to the bank regularly and liaise with them about Bank Guarantees and (standby) Letters of Credit.
2. Be sure to prepare Bank Guarantees and (standby) Letters of Credit properly
   “The first L/C must be perfect. Discuss the text and the risks with your bank. You can then use this as the basis for subsequent projects.”
3. Learn from your competitors
   Analyse how they cover risks and apply their tactics to your own processes.
4. Build up a reliable network
   Work with financial and logistics experts to limit the risks.

Selmers is satisfied with our service, but can also see room for improvement. “The authorisation process, for example, took ages,” says Steenvoorden. This is a good opportunity for us as a bank to streamline certain procedures, which will increase both speed and client satisfaction.

The key to Selmers’ success in doing business internationally is thorough preparation, innovation and smart financial strategies. Bank Guarantees, (standby) Letters of Credit and a good relationship with ABN AMRO help them to minimise their risks and keep control of their cash flow and logistics.

Business owners who want to expand their international business operations could learn from Selmers’ strategy.

• Use Trade Finance products to manage risks.
• Make firm agreements with clients and suppliers.
• Communicate with your bank regularly and always be prepared.

This strategy has helped Selmers to navigate the complex world of international trade with success.