Open Account Trade Products

3 days 20-22 Sep 2017, London UK £3,645.00 + VAT* Download brochure Add to basket

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A 3-day course giving a practical insight into the financing of open account trade. The course will cover the key receivables and payables financing products, their use and operation and the latest innovation and market developments.
The risks encountered by sellers, buyers and banks in open account transactions will be discussed together with the key corporate drivers which underpin the need for financing and risk mitigation on open account trade transactions. The course will also demonstrate how open account trade financing solutions optimise the working capital requirements of corporates.
The course focuses on the identification, evaluation and mitigation of risk, and the structuring of open account trade finance transactions to establish and secure the means of repayment.
Emphasis is placed upon risk assessment, problem solving techniques and deal structuring, through a clear understanding of the trade cycle. Great attention is paid to the effective and appropriate use of open account financing techniques in meeting the customer’s needs, whilst satisfying a bank’s requirement for controlled lending and credit support
The delegates will practice the structuring of receivable and payable financing solutions mitigating risk for the bank, seller and buyer and facilitating the optimum working capital solution for the corporate
The course uses extensive case studies and exercises to develop the understanding of delegates in a structured, practical and engaging way across a range of scenarios on the identification of risk, risk mitigation, structuring techniques and providing optimal solution framing for the corporate.

Course objectives
By the end of this course the delegates will be able to:
  • Identify key corporate drivers and satisfy these through the use of receivables and payables finance
  • Appreciate the importance of the underlying commercial contract and Incoterms® when financing open account trade
  • Gather information to thoroughly assess and evaluate an open account trade proposition
  • Undertake effective risk analysis of open account trade transactions
  • Construct a trade cycle time line to evaluate type, amount and duration of trade finance
  • Describe the key receivables and payables solutions and when they should be used
  • Structure open account financing transactions to mitigate risk for the corporate and the bank and optimise working capital
  • Be aware of the latest market trends and developments in open account trade financing

Training methodology:
Trade and risk; the risks associated with open account trade will be highlighted and how these risks can be mitigated. The fundamental importance of the terms of the commercial contract and the relevance of the Incoterms® rules will be discussed.

Trade solutions; a detailed examination of receivables and payables finance will be provided. Each will be described in terms of its use, operation, risk profile and working capital optimisation through presentational slides, diagrams and examples. Key aspects of structuring and risk mitigation will be highlighted.

Case studies; these will provide an opportunity for the delegates to identify and consider the key working capital needs of the corporate, identify risk and structure the transaction in order to mitigate risk, optimise working capital for the corporate and establish an identifiable and reliable source of repayment for a bank.

Each delegate will receive a workbook containing the presentational slides and supporting material

Who should attend

  • Trade Finance professionals
  • Trade, import and export executives
  • Trade operations personnel
  • Risk Managers
  • Staff within credit management functions
  • Commercial lawyers
  • Commercial and Merchant Bankers
  • Corporate bank relationship managers
  • Relationship managers within Financial Institutions


We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

Stephen Jones

Stephen Jones is a highly experienced trade finance practitioner with over 40 years of trade finance expertise (35 of which was gained in the corporate banking environment). He has held senior trade positions in Lloyds Bank, NatWest and RBS.

Stephen was the first in NatWest Corporate to win, structure and execute a multi-million pound limited recourse receivables finance structure for a new to bank major client. The structure used a syndicate of private insurers to transfer buyer and political risk. This resulted in the successful provision of 3 years trade credit to a buyer in Africa and off balance sheet receivables finance to the exporter

During his time as Regional Head of International Trade, Stephen overviewed and structured his team’s trade finance submissions to the credit department achieving a 97% credit approval success rate over a 4 year period

Stephen continues to work as a trade finance practitioner and consultant advisor handling trade transactions and letters of credit thus enabling him to deliver training material relevant to today’s market



Central London Hotel Venue

All courses are held at four or five star venues in Central London, Zone 1. We strive to provide you with a training environment of the highest quality, to ensure that the whole learning experience exceeds your expectations.

Your training venue will be confirmed by one of our course administrators approximately 3-4 weeks before the course start date.

Related Courses



Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company's exact requirements? If you'd like to do either of these, we can bring this course to your company's office. You could even save up to 50% on the cost of sending delegates to a public course.

To find out more about running this course in-house:

Our Tailored Learning Offering

If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

We produce learning solutions that are completely unique to your business. We'll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.


We can offer any of our public courses delivered at your office or we can devise completely tailored solutions:

Read more about our offering or complete a call back request to speak to a learning specialist.



Day 1

Challenges; open account trade
  • Market dynamics;
    - The growing trend towards open account trade
    - Demand for efficiency, speed and low cost solutions
  • The need for financing and risk mitigation solutions in the open account environment
  • Challenges to:
    - The supply chain
     - Seller
     - Buyer
     - Financier

Key client drivers; the application of open account trade financing

  • The conflicting requirements of seller and buyer
  • Nature, role, importance and implications of trade credit

Working capital

  • The cash conversion cycle
  • The importance and implications of trade credit:
     - Credit & liquidity risk
     - The importance of DSO and DPO

Exercises; calculation of DSO & DPO and interpretation

  • Calculating the funding gap and assessing the facility quantum and period

Exercise; the delegates will be required to calculate the funding gap and required facility quantum of an open account transaction

Identification of open account trade risk

  • Key risks - identification and evaluation:
     - Commercial: gross margin, currency, trade credit, Incoterms®, contractual terms, quality management
     - Financial; debtor credit risk, country and transfer risk (ability to pay), cargo insurance
     - Political risk; contract and/or payment frustration
     - Performance risk; supply chain, nature of goods, dispute, goods rejection, credit insurance policy compliance (willingness to pay)
     - Documentary; debt instrument, export and import clearance, proof of delivery
     - Legal; collectability and enforcement of debt
     - Fraud
  • Sales leverage; USP, strategic or price driven
  • Risk profile of the trade cycle financing entry point

Incoterms® rules 2010

  • Their relevance and importance to trade finance
  • Examination of the most commonly used Incoterms®

Case study: the delegates will examine a commercial contract and identify areas of risk for the seller and financier and the required amendments to mitigate risk

Open account proposition assessment & evaluation

  • Understanding the purpose of borrowing; its importance to the trade financier
  • Key aspects of open account risk evaluation:
     - Basis of sales order/contract;
     - Incoterms® rule;
     - Supply chain; status, credit terms, currency, retention of title;
     - Nature of goods & marketability;
     - Quality risk management;
     - Nature & domicile of warehoused goods;
     - Mode of shipment;
     - Commercial terms of sale; gross margin, currency, credit terms, retention of title
     - End-buyer; credit status, country, reason for purchase

Case study: the delegates will formulate the trade cycle and calculate the facility requirement of a fabric importer, manufacturer and exporter

Trade credit insurance

  • What trade credit insurance is
  • The use, benefits and limitations of trade credit insurance
  • Types and features of trade credit insurance policies
  • Evaluating the nature and extent of cover:
     - Issuer, underwriter and reinsurance;
     - Nature of cover;
     - Pre delivery cover;
     - Insured indemnity;
     - Approved territories;
     - Insured debtor limits;
     - Payment/debt instrument;
     - Maximum terms of payment;
     - Maximum extension period;
     - Insured events;
     - Maximum liability;
     - Uninsured events;
     - Policy exclusions;
     - Reporting and declarations;
     - Policy excess;
     - Aggregate first loss;
     - Period of cover;
     - Reservation/retention of title (“ROT”);
     - Payment of premium
  • Performance risk; adherence to policy terms and conditions
  • Claim history of the client; its relevance to risk assessment
  • Voidance of cover;
     - The proposal form
     - Declaration of material information
     - Overdue reporting
     - Concept of acting as a prudent “uninsured”
     - The legal doctrine of “uberrimae fidei”
  • Using credit insurance as a financing tool
     - Assessing the extent of cover from a financier’s perspective
     - Joint insured and loss payee endorsements
     - Risk appreciation; to what extent can credit insurance be relied upon?
  • Claims and recoveries
     - Claims process; clams waiting period
     - Debt recovery
     - Salvage and recoveries
     - Subrogation

Day 2

Case study: the delegates will review a schedule of insurance and identify key aspects of cover from a financier’s and seller’s perspective



  • What receivables finance is and when it should be used
  • Description, operation and parties
  • Accelerating the receivable; improving the DSO ratio

Exercise: the delegates will examine a debtor listing and identify potential issues, receivables finance opportunities, and further information required to formulate a solution

Nature of the receivable

  • Sales invoice
    - Structure; key information
    - Risk profile; payment claim under the commercial contract
     - Comparison to a bill of exchange and promissory note
     - The need for assignment
  • Bill of exchange (draft) and promissory note; independent negotiable debt obligations

Risk assessment

  • Client risk evaluation:
     - Credit note evaluation; history; frequency, value and reasons
     - “Going concern”; the role of financial statement analysis
     - Bad debt history
  • Intended use of receivables finance;
     - Working capital
     - Asset purchase?
     - Funding losses?
  • The importance of the aged debtor and creditor listings of the client
     - Ageing of debtors; debt turn and trend
     - Spread of debtors; concentration risk
     - Ageing creditors; liquidity pressure or good working capital management?
     - Contra trade
  • Credit quality of the trade receivables:
     - Debtor; ability to pay
     - Political and transfer risk
     - Trade credit term
     - Collectability of debt; legal right to recovery
  • Dispute risk; debtor willingness to pay:
     - Nature of goods; product cycle
     - Credit note history
     - Timeliness of delivery
     - Post-delivery performance obligations; “sell and forget”
  • Encumbrances; can the financier achieve good title?

Case study: the delegates will be required to assess the risks and consider a funding solution for the financing of the sale of a machine to an overseas buyer


  • Invoice dilutions; nature and extent:
     - Short shipment
     - Disputed debts
     - Retro rebates; accrued liability
     - License royalties; accrued liability
     - Settlement discount
     - Counter claim and set off
     - Contra trade
    - Marketing contributions
  • Credit note history;
     - Frequency, reasons and value
     - Credit notes outstanding

Deal structuring

  • The concept of the self-liquidating facility
  • Assignment and/or contractual agreement for the assignment of debt and proceeds1
     - Definition and concept
     - Types of assignment; legal and equitable
     - Notice of assignment and acknowledgement
     - Legal provisions for perfection of assignment
     - Dealing with contractual “ban on assignment” of debts
  • Disclosed and non-disclosed facilities;
     - Risk implications
     - When to use
  • Rights of recourse; the operation of with, without and limited recourse finance;
     - When to use
     - Repurchase events
  • Retention of  title
     - Transactional or “all monies”
     - Its importance when using trade credit insurance
  • The importance and relevance of Incoterms® rules
     - Point or place of delivery
     - Documented proof of delivery
  • Retention reserve; why, when and how used
  • Funding limits
  • Non-eligible debtors:
     - Sales to associated companies
     - Sales to private individuals
     - Debts with remaining performance obligations
     - Uninsured debts
     - Significantly aged debts
  • Allowable overseas territories; collectability of debt
  • Documentation; key aspects of the:
     - Purchase order
     - Debt instrument
     - Proof of delivery
  • Ring fencing and capturing the receivable;
     - Trust and collection accounts

1 In the absence of assignment provision under some country laws the course will discuss the concept according to English law

Case study: the delegates will assess the risks of a receivables finance proposition, formulate a solution using a credit insurance policy to enable a large automotive manufacturer to finance the sale of vehicles to a buyer in Africa on three years trade credit


  • Calculating the maximum funds in use requirement (“MAFIU”)
  • Determining the amount to finance (prepayment)
  • Debt purchase at a discount to face value:
     - Calculation of interest

Debt purchase agreement

  • Clause structure:
     - Maximum funds in use (MAFIU);
     - Prepayment percentage;
     - Concentration percentage;
     - Charges;
     - Security;
     - Purchase price;
     - Period of agreement;
     - Notification;
     - Eligible and non-eligible debts;
     - Recourse and repurchase events;
     - Approved territories;
     - Representations, warranties and undertakings;
     - Covenants;
     - Termination events
  • Director’s fraud warranty

Charging structure

  • Administration/service charge
  • Discount
  • Refactoring

Balance sheet treatment for corporates

  • The concept and importance of “true sale” for de-recognition; key areas of assessment
  • De-recognition of assets and liabilities:
     - Linked presentation
     - Separate presentation
  • Risk implications of recharacterisation

Case study: the delegates will be required to formulate a receivables financing solution in the manufacturing sector. Key areas of risk assessment will be considered, calculation of the facility amount and required documentation


  • Fictitious “fresh air” invoicing
  • “Pre-delivery” invoicing
  • Banking proceeds
  • Encumbered trade receivables
  • Double or multiple financing

Select insured receivables finance

  • Description
  • Client profile
  • When it should be used
  • Key aspects
  • Operation & process
  • Risk and benefit analysis

Full factoring

  • Description
  • Client profile
  • When it should be used
  • Key aspects
  • Services:
     - Working capital financing
     - Credit risk protection
     - Sales ledger management
     - Collection services
  • Operation & process
  • International factoring; structures
  • Risk and benefit analysis

Confidential invoice discounting

  • Description
  • Client profile
  • When it should be used
  • Key aspects
  • Operation & process
  • Risk and benefit analysis

The use of invoice finance and factoring in trade finance:

  • The use of invoice finance/factoring to repay a trade finance facility
  • The importance of the net prepayment percentage to trade facility repayment
  • Risk “gap” between trade financier and invoice financier
  • The tri-partite agreement; use of a third party invoice financier

Day 3


Introduction; payables finance

  • Financial challenges and performance risk in the supply chain
  • What payables finance is and when it should be used
  • How trade finance can improve key customer financial metrics:
     - DPO
     - Payment acceleration for settlement discount

Exercise: the delegates will examine a creditor listing and identify issues, payables finance opportunities, and further information required to formulate a solution

Pre-shipment payables finance

  • Description, operation and parties
  • Risk appreciation and structuring:
     - Advance payment to the supplier
     - Financing prior to shipment to the end-buyer
     - Financing post shipment to the end-buyer
  • Goods; risk considerations
     - Control of goods in the open account trade environment
     - Dispute risk; specification, quality, quantity and timeliness of delivery
     - Secondary market liquidation; timeliness, branding, realisable value and re-sale restrictions
     - Licensed goods; royalty payment risk implications
  • Performance risk; its importance to the financier

Case study: delegates will be required to identify risks and structure a funding solution which mitigates risks for the importation of frozen chicken meat and its sale on extended trade credit terms

Approved payables finance (reverse factoring/supply chain finance)

  • Description
  • Key aspects:
     - Buyer-led
     - Buyer credit risk exposure
     - Supply chain;
            Risk mitigation
            Opportunity for monetisation of approved invoices
  • When used; key decision making criteria of:
     - Buyer
     - Supplier
     - Bank
  • Methods of approved payables financing:
     - Buyer managed platform; dynamic discounting
     - Bank proprietary platform
     - Multi-bank 3rd party platform; “customer community”
  • Use of bilateral contracts:
     - CMSA (customer managed services agreement)
     - FIA (financial institution agreement)
     - Supplier agreement
     - RPA (receivables purchase agreement)
  • Bank role:
     - Discount purchase of approved supplier invoice (subject to assignment)
     - Paying agent “payment factory”
  • Process
  • Financing options:
     - All supplier invoices
     - Selective invoices (at supplier option)
            Supplier discount finance example
  • Risk implications and considerations for the bank
  • Benefits, advantages and disadvantages to the:
     - Buyer
     - Supplier
     - Financier

Bank payment obligation (BPO)

  • Description, operation & parties
  • Key aspects;
     - Bank to bank instrument
     - Conditional undertaking to pay
     - Data matching
  • The baseline: what this is and its fundamental importance to the BPO
     - Establishment
     - Data sets and fields
     - Amendments
  • Message flows between banks; global messaging standards ISO 20022 TSMT
  • The Transaction Matching Application “TMA”:
     - SWIFT TSU
     - Bank roles
     - Transaction status
  • Data matching:
     - Mis-match acceptance
     - Mis-match rejection
  • BPO process; example
  • Financing BPOs
  • Differences between the BPO and a letter of credit
  • Key aspects and limitations of the ICC URBPO rules
  • Current market trends; low market adoption - barriers to take-up
  • Risks to buyer, seller and bank
  • Benefits, disadvantages and limitations

Block chain for trade finance

  • Introduction; what block chain is
  • The key features of crypto technologies (block chain and distributed ledger technology):
     - Smart contracts
     - Creation of unique digital assets (“tokenised”)
     - Cryptographic proof of title to the asset i.e. trade receivable
     - Digitised approval and timestamping
     - Immutable and single “version of the truth”
     - Digital asset transfer
  • Potential benefits of crypto technology in trade finance to:
     - Corporates
     - Banks/financiers
  • Conceptual potential for trade finance applications:
     - Exchange of information/trade data across the trade value chain
     - Digitising letters of credit
     - Trade financing
  • Recent market developments & initiatives

Case study: delegates will identify risk and formulate a financing proposition for a wholesale distributor throughout its trade cycle covering pre shipment, goods in transit, warehousing, call-off of goods and direct FOB sales

Summary and close

Why us

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