This was re-published with permission from Lachesis, LLC.
By Julie Vigue
With all the buzz around dashboards and data analysis, there’s an obvious consensus in the business community that finding a better way to review reports is a priority to many organizational leaders. Unfortunately, the standard reports and dashboards offered by many applications fall short of providing an in-depth evaluation of data. Many organizations have shared that it is a common practice to export multiple, standard reports to a spreadsheet where the information is then sorted and totaled in various ways.
And, while having Excel experts on staff is a good thing, spending time formatting reports, or creating complicated templates to automate a reporting process may not be the best use of time, particularly when new information needs to be included and the template needs to be updated/recreated. Additionally, combining multiple data sources, i.e. internal server information and online data sources, can be extremely challenging to include on dashboards.
What information will allow you to make better business decisions?
With so much emphasis on the ability to display graphical reports and the tools to create them, who is making the decision of which numbers should be in the reports? Standard financial reports provide a snapshot in time of the account balances, cash flow, etc.. Beyond standard financials, the financial application, CRM application, payroll application, ERP application, and other software that your organizations use on a daily basis contain valuable data.
The key to success is knowing what infomation will provide true workforce solutions that can assist in overcoming business challenges.
After years of working with customers in various industries, here’s a list of the areas that are either overlooked by leadership teams or present a challenge too difficult to overcome in the past.
Most companies have multiple price schedules. A standard price for the purchase of single items, maybe from a web site, and customer specific pricing or tiered pricing depending on volume. With the various price schedules, is there a mechanism to ensure the margins maintain profitability. This can become especially challenging if you are in an industry where the raw material costs vary on a daily basis, such as oil/petroleum used in building materials. In addition to mining data from internal sources, outside sources that provide information regarding petroleum, or other raw materials, can also be accessed and included in the equation for price calculation.
With the pricing model described above, an obvious choice is to find vendors that will provide a discount pricing model based on quantity or other criteria. Beyond discount pricing, many organizations express the need to monitor pricing on an annual or bi-annual basis. Additionally, other factors such as the industry, or having multiple locations can pose a challenge. How do you make sure the office in Atlanta is paying the same for office supplies in Sacramento? Other concerns include back order visibility, returns processing, and managing blanket purchase orders attached to projects to maintain margins.
This is an area that can be exploited if it’s not being managed. For example, one customer shared an experience where the distribution channel found that if they submitted a warranty claim for a specific item, the manufacturer replaced the item with a kit. The kit contained many spare parts that were not necessarily needed for the repair of the item. Instead of ordering the replacement part, the channel would order the item that included the kit. Identifying the loophole and making the correction reduced the warranty costs by millions.
Additionally, as IoT becomes more prevalent, recording environmental conditions such as humidity, temperature, time of day, etc. that were present during manufacturing and comparing that information with the warrantied items, organizations can identify trends that caused the need for the warranty.
4. Labor Costs
From engineering firms to manufacturing to legal services, organizations have expressed difficulties in including time and labor costs in the equation of calculating margins, or profitability of projects. Seemingly, the process of gathering the labor costs are too cumbersome and the organization resorts to applying an average rather than the actual cost to determine profitability.
5. Sales Commission
Every organization has a unique way of calculating commissions for sales efforts. Some base the commission structure on a percentage of revenue while other prefer to calculate based on margins. With more complicated models, a variable cost for raw materials require a complicated equation to ensure the company is maintaining profits prior to calculating commissions. Additionally, for opportunities that require special negotiations due to the size or complexity of the deal, a separate commission calculation may be applicable.
Regardless of the commission model, there is a formula for each calculation. How is the formula being calculated at your organization? Is it a manual process using a series of spreadsheets? How long does the process take each month? How accurate are the figures?
When we ask business executives: Who are your best customers? We receive a plethora of answers. Unfortunately, in most cases, the wrong criteria are being used to evaluate customers and the theory is that the best customer is the one who spends the most. Organizations need to start evaluating customers based on the revenue and the profitability of the spend, as well as other factors such as how quickly do they pay, affecting the value of time and money, and the amount of resources that are required to maintain the customer relationship (internal costs).
The obvious information is the how much was sold, by whom, when, and how does that compare to quotas. Additionally, month to date, year to date, as well as annual comparisons (year-to-year) are common sales figures that are reviewed regularly. However, gross sales alone do not make a customer valuable.
Consider how the answers to the following questions would be beneficial in designing a sales strategy: How long does it take to acquire a new customer? How many new customers have been added in the past 12 months? How many customers have been lost in the past 12 months and what is the estimated lost revenue based on previous purchasing habits? What customers have declined their purchases in the past 12 months and when is the last time a sales representative met with them?
Of course, this list is only a sample of the questions that your data could potentially answer. The goal is to identify the specific business challenges that face your organization and design a solution to overcome them and to thrive.
At Lachesis, we begin with a conversation about your business and how you define success. Following that conversation, we identify and agree on an initial project that provides a solution to an identified challenge within the business. The Lachesis team is comprised of professionals with decades of international consulting experience that will guide you along the path of success.