By Mike Flanagan
For VARs to be successful in today’s competitive market, there’s little room for error. Thin margins make every sale an opportunity to make or break profits, while stiff competition and high customer expectations make it difficult to earn repeat business. Meanwhile, the challenge of managing multiple suppliers, evolving price lists and disparate products/services means that costly mistakes are often inevitable.
Despite this, the industry is a lucrative place for VARs that know how to gain an edge over competitors. In a business with tight profit margins, complexity and competition, the profit- and customer-focused VAR will come out on top.
Still, many VARs focus more on the service side and neglect the process component. The problem? Companies that use multiple spreadsheets or stand-alone tools to manage processes are more likely to make costly mistakes. They are also missing out on opportunities to increase revenue and gain repeat business.
So how do VARs avoid the pitfalls and thrive in today’s competitive environment? Here are five strategies.
Margins are tight and VARs can’t afford to be casual about them. Every sale is an opportunity to make or break the bottom line, so it’s important to arm sales teams with the information needed to maximize profits at the quote level.
When pricing and procurement are managed using spreadsheets, sales is repeatedly set up for failure. Reps have to quote based on stale pricing and inventory data, increasing the odds of unfavorable margins. The approvals process is manual and cumbersome, adding unnecessary friction to the sale. Meanwhile, sales is compensated based on dollar sales versus margins — two numbers that are not always correlated.
Today, there are tools that provide real-time data on pricing, inventory and previously negotiated customer agreements. This makes approvals fast and easy so that companies can set up workflows accordingly. Sales can also see margin at the quote level so that management can compensate reps based on margin versus revenue, ensuring every sale is profitable.
For most VARs, managing several moving parts is part of the day-to-day. Between maintaining price lists for multiple suppliers, keeping track of inventory and ensuring correct billing and compliance for all goods and services, every deal can feel like a juggling act and it’s easy to drop one of the balls. VARs that use legacy systems to manage these operations are putting themselves at an unnecessary disadvantage. Data updates are cumbersome, workflows are stunted and mistakes too frequent.
Companies that use a quote tool built on top of their SCM can give quotes based on accurate pricing and preferred suppliers, eliminating costly mistakes.
It’s not enough for VARs to meet customer expectations. Today, they must exceed them. The B2C customer experience has raised the bar significantly and exceeding expectations has become harder. Customers expect speed, accuracy and transparency from the companies they do business with. Why should they expect less from their VAR?
By implementing a system with a 360-degree customer view, VARs can immediately send order acknowledgments to get ahead of any errors. Additionally, they can easily track order history and make sure that quotes and invoices always match, which builds customer confidence and trust.
With many moving parts in the procure-to-pay and quote-to-cash processes, it’s essential that everyone’s on the same page — from suppliers to sales reps to billing departments.
Internal and external collaboration is nearly impossible when companies use disparate tools to manage SCM, billing and quoting processes. Without access to an online supplier catalog, sales has to rely on stale data or multiple phone calls to confirm inventory and pricing, increasing the chances of mistakes and botched deals. The warehouse has limited information about customer importance and open orders, making it impossible to prioritize, and internal departments can’t monitor things like order statuses, which could cause missed customer service opportunities.
Everyone within an organization should have access to the same information about each customer. This eliminates unnecessary conversations and provides a better view into profit margins, making it easier to dictate future business strategy.
A VAR’s compliance situation is complex. Managing taxes and revenue recognition for various goods and services will always be difficult, but when it’s done using spreadsheets, it can quickly become a nightmare. Quotes and sales can be thousands of line items, making it time-consuming to track and easy to get wrong — potentially leading to costly penalties or legal issues. Compliance is too complex and too important to be managed manually.
The bottom line: VARs must update their systems to get a comprehensive view of every stage within the supply chain life cycle. When all departments have the same access to customer accounts, pricing, inventory and billing information, errors are eliminated and time-consuming manual processes become a thing of the past.
Mike Flanagan is the general manager of supply chain management (SCM) applications at FinancialForce.com. Previously he was the CEO and co-founder of Less Software, which was acquired by FinancialForce.com in 2014. Flanagan has more than two decades of successful senior management experience at small and large companies including Honeywell, Teleflex, Western Data Systems, Avexus, Oracle and Manugistics/JDA.