Based in Stockholm and with sales around the world, including key markets in Scandinavia, Germany and Japan, Flattered create contemporary designer shoes with a focus on quality and functionality. Each collection of shoes is designed by Flattered’s in-house team, with the sketches then sent to specialised factories in Spain to be produced. The Spanish suppliers source all of the raw materials required to make the shoes and receive payment from Flattered once the finished goods are shipped.
With collections twice a year, Flattered’s lead times stretch over a number of months and are similar to those usually found in traditional fashion production cycles. Typically, work on designing a new collection will begin eight months before an order is sent to the suppliers and eight months before the shoes are ready to be sold. This long lag between costs and income can have a very large impact on available cash.
Gustav Lidén, CEO of Flattered, says: “We have quite old-school cycles for our collections and the upfront payments can of course often be a hassle. We pay for the work of our designer and related salary costs but in theory we may not receive any income for almost a year later on a particular collection. We used to have to pay our suppliers 30% of the overall costs as soon as we placed an order with them. As our business has expanded and we have grown our order sizes with the factories, we now make a 100% payment only when the goods are shipped from Spain. This is always a discussion back and forth with our suppliers.”
”With regards to securing credit on the payments, our suppliers have previously been requesting a Letter of Credit from our bank. For a company of our size, a Letter of Credit can be a complicated process with transaction fees that are too high for us. When I first heard about we.trade, it was very interesting as the platform offered us another option for extending credit times,” adds Gustav.
Guarantees and cash with we.trade
The blockchain based trade platform we.trade simplifies the trading process by allowing companies to find commercial counterparties, create trade proposals and purchase orders, set payment conditions and request related services from their banks, which can be agreed upon and executed in a secure space. Any company that is a customer of the European wide consortium of banks supporting the we.trade platform can sign up and begin trading.
Flattered were one of the first companies to use we.trade and transferred all of the elements of their trade relationship with their eligible Spanish supplier to the platform. Adding a supplier to the we.trade platform gave Flattered an improved set up when paying their supplier for products in advance.
Urban Ljungblom, Trade & Working Capital Development at Nordea, says: “It suits Flattered to make transactions via we.trade as they previously have been obliged to pay in advance. Paying upfront for purchase orders in November to make a spring collection of shoes takes lots of liquidity. This can either be paid directly by Flattered or with a bank overdraft facility. Now Flattered are using we.trade, they can place an order and offer the counterparty also using we.trade a bank payment guarantee. That enables the counterparty in Spain to feel secure that they will get paid. Suppliers are also able to discount their receivables in their banks, thereby receiving payment up front once they have fulfilled their part of the contract. This means that liquidity aspects can be solved not only at the buyer’s side but for sellers as well.”
Suppliers are also able to discount their receivables in their banks, thereby receiving payment up front once they have fulfilled their part of the contract. This means that liquidity aspects can be solved not only at the buyer’s side but for sellers as well.
Urban Ljungblom, Trade & Working Capital Development at Nordea
“The alternative of utilising an overdraft facility or arranging a Letter of Credit creates higher costs for Flattered. From a bank’s perspective, a payment guarantee should be better from a credit risk point of view and will definitely consume less capital. This is on top of the risk of handing over the money without knowing whether the counterparty will actually satisfy the conditions that were agreed. The guarantee of a bank payment undertaking can only be arranged via we.trade and is a very efficient way for Flattered to request improved payment terms from their supplier,” adds Urban.
Gustav says: “Liquidity is one of the major bottlenecks that can constrain our ambitions to expand. We.trade has definitely helped us to receive extended credit days for payments to our supplier. The platform and its related services enabled us to negotiate a generous extension of payment terms. Our supplier was able to sell their receivables to their bank once delivery had taken place, without utilising their credit lines in the respective bank.”
“We.trade is a very good and effective way for us to connect with a financial instrument that is very well suited to the particular structure of our business. As up front payments are such a large part of our operating model, extending payment terms via we.trade with a bank payment guarantee is as convenient for me as a credit line. I know from the bank’s side that it’s also a much lower risk for them,” notes Gustav.
We.trade is a very good and effective way for us to connect with a financial instrument that is very well suited to the particular structure of our business. As up front payments are such a large part of our operating model, extending payment terms via we.trade with a bank payment guarantee is as convenient for me as a credit line.
Gustav Lidén, CEO of Flattered
Growing the ecosystem
As the number of banks supporting we.trade continues to grow, the ambition is to increase the range and scope of the trade related ecosystem built up around the platform. Any customer of one of the we.trade member banks is able to sign up to the platform free of charge to begin trading with any other member bank’s customers.
Gustav adds: “As everything has worked well for us with we.trade, it would be great if other suppliers came onboard so that we are fully able to use this platform instead of sending money directly. We already have a good level of trust with our current suppliers but we.trade is undoubtedly a very strong tool for adding a layer of trust to any new or volatile trading relationships.”
“I would love to have all of my supplier in we trade. That would be the best both for us and for the suppliers because the suppliers can sell their invoices directly in the platform as well. For example, even though I was given 90 days to make a payment, the supplier can very easily sell the invoice they have sent to me in the we.trade platform and receive cash within 24 hours. This is possible without utilising their own credit lines because when a bank discounts the receivable, they do that with risk of the counterparty bank rather than the company itself,” adds Gustav.
We already have a good level of trust with our current suppliers but we.trade is undoubtedly a very strong tool for adding a layer of trust to any new or volatile trading relationships.
Gustav Lidén, CEO of Flattered
With many aspects of the traditional trading process of buying and selling goods slow and paper based, we.trade offers a glimpse of a more automised, friction free way to trade.
Gustav concludes: “We.trade works really smoothly and registering a trade agreement takes me less than a minute. Payments are executed automatically at the agreed due date based on notifications generated by the platform and I do not need to do anything. It’s great to see everything going faster and the only action that needs to be taken now is to get the other counterparty online and on the platform. As well as my suppliers, I would like to use this for my customers as well so that it works for the invoices I am sending them. I’m really looking forward to the day when both my customers and suppliers are on the platform.”
See the latest footwear from Flattered here: https://www.flattered.com/
Contact your Nordea Trade Finance advisor for further assistance or find out more about we.trade.
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