Great to have some overview

Great to have some overview

March 2024
From a chemical company in Ludwigshafen (Germany)

We are a large company producing and trading a whole host of chemicals. Over the years our credit department has implemented procedures to reduce the risk of bad debt. An important aspect is the securing of letters of credit.

The process of obtaining them is difficult enough, but the administrative effort required after the documents have been issued creates a sizeable workload. In fact, we even employ ‘Letter of Credit Officers’. The description of their daily duties illustrates some of the administrative workload: ‘….the monitoring and gathering of necessary information to complete Letters of Credit. ..the provision of regular management information…etc.’.

We know that letters of credit are beneficial as they serve the interest of both buyer- and seller. However, from an operational point of view the Letter of Credit leads to many ‘headaches’ – the main one being a lack of uniformity in documentation, process and monitoring or administration in a broader sense.

As a company trying to save costs and streamlining our business processes, we had been looking into these issues for a while when we found a company called Mercurion Trade Services. They offer a digital platform through which agreements with customers can be negotiated and settled.

Based on the specific trade agreement the customer will pay the applicable invoice amount in an escrow account managed by the Baltic Exchange. As soon as the cargo has been delivered at the agreed place of destination, Baltic Exchange will settle the transaction by releasing the funds to us.

The advantage for us is that the process is uniform across countries and jurisdictions and that all correspondence will be carried out in digital format through the platform. The platform comprises a dashboard whereby the specifics of every trade agreement can be easily called up by clicking on the various links, revealing various levels of detailed information.

So, we are no longer required to maintain complicated process manuals and have a relatively large number of staff involved in all of this. It means that people in sales have more time for business development and some of the letter of credit officers can be reassigned to other areas, saving cost, speeding up operational processes and reducing management time, which in turn enhances profitability.

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