One of the most common hurdles when trading with both vendors and clients is understanding your net margin position.
You have to contend with rebates, discounts, markups and any other hidden additions or discounts, it’s often tricky at the best of times to keep track of your margin.
However, there is one problem.
You don’t always know what your margin is until rebates come in and go out.
What often catches companies out is lack of margin visibility. The inability to see true cost and true profit at the time of transaction can very often cripple a company and lead to great profit margin loss.
So the question is: How can this problem be fixed?
Luckily, the answer is straightforward: Trade Revenue Management Software which allows for margin visibility.
Now, I know you’re sitting there thinking, “Do I really want to spend more money on a software program which I don’t absolutely need? We have our spreadsheets and for the most part we have done pretty well with them. One or two losses against many gains isn’t that big a deal.”
I agree. But what if we told you that with the correct type of software you’d not only be able to avoid unprofitable deals but increase your profit margins as well?
We have seen many companies miscalculate products and discounts, causing themselves pain in the end. Spreadsheets, with all of their capabilities, never quite seem to provide the required clarity and flexibility.
However, we have seen those same companies come out on top as well. After gaining margin visibility, they went from a position of weakness to a position of strength, where they were not only able to avoid bad deals but ended up buying out competitor companies who had gone bust from their lack of accurate bargaining power.
So that leads us back to the original question: Why should you invest in a trade revenue management software program?
Simple: Margin visibility.
The ability to bargain with knowledge is absolutely priceless. To be able to understand what you’re really earning after all the discounts, rebates and markups are taken into account is the biggest upper hand your business can possibly get.
What might that upper hand look like? Well here are two of the biggest reasons:
The struggle with margin visibility is the lack of clarity between the time of transaction and rebate settlements. You want to be able to know today what your profits will look like at the end of the month when the rebates come in, as this knowing (or not knowing) can greatly help or hinder your ability to make profitable deals.
Yes, you can go through and do it all manually, adjusting the discount percentage per item for every customer, but when your company deals with thousands of SKUs on a daily basis, the administration manpower required would be far too taxing. You want a system that takes away admin burden and which calculates and allocates true margin when you need it.
Automation of your accruals and payments will allow you to see at the time of transaction where client, product and vendor profitability lies.
As transactions will allocate back to the client, product and vendor automatically, you won’t need to do it all offline from a secondary database later. The tracking of incoming and outgoing rebates will constantly be visible to match with purchase and sale, so you will have not only clearer visibility as a whole but know what is available to work with at that time.
Because you will be able to see what is earned by product, vendor or customer, transaction visibility will become more flexible.
With this data you will be able to create any margin view you want, whether that’s price dropdowns, markups or cost of goods, and tricky things like growth rebates will become a breeze.
Cut unprofitable losses and greatly increase your profit margins by using a software solution for trade revenue management. It’ll not only change your life, it’ll change your bargaining too. And that means, more money in your pocket.