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Lack of Accounting Visibility = Lost Revenue Opportunities

insightsoftware -
December 2, 2020

insightsoftware is the global provider of enterprise software solutions for the Office of the CFO to connect to & make sense of data in real time, driving financial intelligence across […]

Lack of Accounting Visibility=Lost Revenue Opportunities

A common complaint of executive level management is “I know that we track a lot of data in our ERP system, but for some reason, we have a lot of difficulty gaining visibility into that information.”

That lack of visibility has many implications, including an incomplete view of the levers of profitability, time wasted tracking down information, and the inability to identify macro trends, and adjust strategy to new market conditions. That’s far from being a complete list, but even that short list of concerns is enough to prompt business leaders to reconsider the default approach to financial reporting.

Changes to the financial landscape in 2020 forced businesses in almost every industry to rethink their products, relationships, channels, modes of delivery, and more. That kind of disruption compels leaders to ask questions that might never have been considered in the past. For data-driven organizations, that means having the ability to query the information stored within their software systems and analyze the potential impact of each proposed alternative.

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For many, early 2020 brought with it a sharp drop in revenue. Business leaders scrambled to identify potential new revenue sources and to build a more diversified approach to revenue for the future. Those who had clear visibility into their ERP data, as well as the flexibility to translate that data into actionable information, were in a far better position than their peers to discover new opportunities and take advantage of them.

Let’s look at a few ways in which clear visibility to accounting data translates to higher revenue and greater profitability.

1. Seizing Upon New Opportunities (Quickly)

When the coronavirus hit, a North East manufacturer of store fixtures anticipated a drop in the sales of its core product offerings, following the shock that was experienced by many businesses throughout the retail industry. At the same time, the manufacturer recognized the widespread need for acrylic barriers to help guard against the spread of the virus, not only in retail stores, but in virtually any organization that interacts with the public on a regular basis.

Acting on that kind of opportunity requires a rapid response. For the finance and accounting team, that means building financial models for a completely new line of business. It means understanding the financial impact of the impending revenue shortfall and determining whether and how existing resources can be re-allocated to support the new product line. It means analyzing the existing customer base to understand their buying patterns, determining their needs throughout a period of business closures, and building forecasts to assess the viability of the new business and the potential impact on cash and receivables.

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The window of opportunity often closes quickly. The availability of personal protective equipment was limited, especially in the early days of the pandemic. Businesses rushed in to address those needs, and the fastest movers were able to serve an important need and protect the jobs of their own workers in the process. Companies that are able to move quickly on these kinds of opportunities will be well-positioned to capitalize on them.

Although the turmoil around shutdowns in 2020 offers a familiar example for just about everyone, the lesson can be applied to almost any industry at any time. New opportunities arise frequently, and it’s important that the finance department has the capability to quickly and easily build accurate models to assess those opportunities.

2. Increasing Fill Rates

The science of supply chain management has benefited substantially from ERP and information technology in general. Unfortunately, however, many small and midsize companies still struggle to balance the need to minimize inventory with the mandate to optimize order fill rates. Management should be looking at those numbers on a regular basis in order to better understand how the organization is performing, and in particular, whether revenue opportunities are being missed because the business is unable to fulfill customer demand.

If available-to-promise (ATP) numbers are consistently accurate, for example, then the company should have a reasonable degree of confidence that inventory is being managed efficiently. If not, it may result in missed delivery dates, canceled orders, and unhappy customers. You can’t know that if you don’t have clear visibility into the data.

If shortages of certain items are pending, there may be cause to seek alternatives that can still satisfy customers’ needs. Again, clear visibility to customer demand and the supply chain provides early notice that corrective action may be required. By continuing to serve customer demand – albeit with an alternative product – the business can avoid losing out on critical sources of revenue.

3. Upsell and Cross-Sell

Historical data about customer purchasing patterns can also provide insight into potential new sources of revenue. By identifying similar items that are frequently purchased together, businesses can identify opportunities to cross-sell additional items, thereby increasing their share of the customer’s total spend.

You can also use that kind of data to identify potential areas for improvement in sales techniques. If upselling customers to higher-margin product is a viable strategy for the business, it’s important to identify who is doing it successfully, and who is not. With visibility into sales information, that kind of analysis is relatively easy to perform. You can call on team members who are successful with an upsell strategy to share their best practices with the rest of the organization.

4. Net-New Customer Opportunities

There are a number of opportunities which are simply unavailable to companies that are unable to provide clear visibility into product provenance, carbon emissions, and more. Large organizations are increasingly demanding compliance with other standards from suppliers. In 2017, for example, Walmart announced its intention to reduce overall CO2 emissions. That effort, which the company calls “Project Gigaton”, focuses primarily on reducing the company’s carbon footprint via its supply chain. In other words, Walmart will expect its vendors to maintain information on the carbon impact of the products they sell to the company.

Very few ERP vendors have implemented processes within their software to track that kind of information. In the largest, most expensive systems, it is beginning to happen, but for most organizations, the challenge can be addressed with a combination of custom user-defined fields and flexible reporting tools. For most small and midsized companies, reporting tools can play a critical role in complying with those kinds of mandates.

5. Eliminating Inventory Shrinkage

For many companies, inventory shrinkage is a significant problem. Some root causes are easy to identify. Spoilage of perishable product due to a power outage or natural disaster, for example, is easily attributable to a specific event. In other cases, however, it can be difficult to detect shrinkage, and problems are often not discovered until significant losses have already occurred.

Although complete physical inventory counts are relatively rare due to the effort involved, many companies use cycle counting to ensure that physical inventory matches the value on the company’s books. With the right reporting tools, finance and accounting can gain clear visibility to inventory discrepancies. This enables them to raise questions and investigate variances earlier than might otherwise happen.

6. Intelligent Pricing

Very often, companies can add to their top line revenue simply by taking a more strategic approach to pricing their products and services.

In high-volume businesses, including e-commerce, that can include analysis of sales volumes at different price points (and through different sales channels) over the course of time. By understanding customer buying patterns and the impact of price on purchasing decisions, businesses can squeeze higher margins out of existing sales.

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Even for companies that negotiate most of their sales transactions, there are opportunities to increase top line revenue when they have greater capacity for analyzing their data. Discounts are often negotiated on sales volume over a period of time, for example. If an organization is not reviewing customer commitments on a regular basis (including performance against those commitments), they are potentially missing out on margin lost to excessive volume discounts.

Reduce Your Dependency on Manual Reporting Processes

In the quest to survive and thrive in a chaotic world, the capability to turn data into actionable information is critical. Unfortunately, reporting consumes far too much staff time in many organizations because it requires tedious manual processes like copying and pasting information from exported CSV files or system reports, or entering information by hand into Excel spreadsheets.

Those kinds of processes also introduce errors, leading to a lack of confidence in the information being reported. Business leaders consistently express frustration at the difficulty of getting clear information out of their software systems in a timely way. When an organization has clear, accurate, timely information based on real-time data, everyone in the business can operate according to a single version of the truth. That means the management team can spend less time arguing about the numbers, and more time solving problems and improving business results.

insightsoftware provides financial intelligence and operational tools for over 140 different ERP systems, including Microsoft Dynamics 365 Finance and Supply Chain Management. For nearly three decades, we have been helping business leaders get the information they need quickly, accurately, and efficiently. If your organization is aiming to increase revenue in the coming year, contact us today to schedule a free demo.