The Dangers of Selling Under Your Margins
Do “fire sales” make sense? When items in your warehouse aren’t moving, do you run sales or specials to move them out and make room for the new? Do you find that your sales representatives offer too-generous discounts to customers to boost sales reports?
These two situations may result in selling product below your required profit margins—a problem manufacturing and distribution companies often face. However, these problems can be avoided with the right warehouse management system and accurate data.
Accurate Inventory Data Improves Decision-Making
At the heart of managing your margins is accurate data. It is only when you know precisely how much the costs of goods are and how much a discount affects the margin that you can make sound decisions. While “fire sales” can clear out excess inventory, are you aware of the cost of these sales? Do you have the data you need to base sales quotas on actual profitability rather than on gross sales?
Data derived from your warehouse management system can go a long way to helping your business remain profitable without sacrificing margin. Here are three tips to help you use your inventory data to improve profitability
- Know Your Profit Margin
First, it’s important to know your profit margin. Accurate data from warehouse management systems integrated with your ERP can help you analyze the profit margin of each product and make sound decisions on discounts and sales that won’t cut deeply into margins.
These tools can also be used to set organization-wide pricing and discounting policies. By establishing company policies nationwide, you avoid having one regional representative or one particular sales manager steeply discounting products just to help his team achieve sales.
- Reward Good Customers to Engender Loyalty
Accurate customer data can help you track customer loyalty and longevity. Such customers can be rewarded with sales or bulk discounts. Using a mobile sales app like Scanco Sales that is integrated with your ERP can keep you from discounting products too steeply and cutting too much into your margin. It can also help you establish customer parameters for sales that won’t undercut your profits but will help boost the bottom line.
- Adjust Sales Goals to Reflect Several Objectives
You certainly want to assess your sales team on how well they sell—that’s a given. But when the focus is solely on the overall sales figures without consideration of how those figures are achieved, it leaves the process open to interpretation and tactics that may cut deeply into your margins.
Align sales goals with both performance-based objectives and company-wide objectives. Scanco Sales and your ERP can help you with this task by assessing customer loyalty and retention. These metrics point to satisfied, happy customers which are also good customers more likely to recommend your business to others. Such customers are more valuable than those “bargain hunting” and for whom cutting deeply into the margins may not be enough over time. You may end up discounting such customers’ orders so much that it’s not even worth pursuing their business.
Ensure Data Accuracy with Scanco Products
Scanco offers manufacturing and warehouse solutions that provide real-time, accurate data on your products. That information seamlessly integrates your ERP such as Sage 100 and Sage 500. Accurate data and operational controls will go a long way toward keeping your operations more profitable. Contact us for a free consultation.