If you are facing pressure on your profit margins, here are a few ideas to consider. Software technology tools can give you the data you need to make smarter decisions and take action to prevent eroding profits.

Do you recognize either of these problems?

  • There are too many items in the warehouse, so you run sales or specials to move older stock out and make room for the new. Such sales can clear the warehouse floor, but at what cost?
  • Your field sales reps are offering too-generous discounts to current customers in order to boost their own sales reports. These reps may have quotas to achieve that are based on gross figures rather than a web of interconnecting goals to be evaluated and assessed. When the gross sales are all that’s being analyzed, sales people will do anything to boost their big figures and neglect other company-specific goals. The results may be sales that cut too deeply into margins.

Both of these problems are typical. They are, however, problems that can be avoided with the right management and data.

Protecting Your Profit Margins

  1. Establish Discount Policies

First, it’s important to know your profit margin. Tools such as Sage 100 and Acumatica 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.

  1. Reward Good Customers to Gain Loyalty

Customer relationship management (CRM) software can help you track customer loyalty and longevity. Such customers can be rewarded with sales or bulk discounts. Integrating your CRM system with Sage software or Acumatica 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.

  1. 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. CRM software 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.

  1. Profitability Starts with Good Data

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. Data derived from systems such as Sage 100 or Acumatica can go a long way to helping your business remain profitable without sacrificing margin.

Better Software = Higher Profits

Are your current software systems helping you achieve your profitability goals? Accounting Systems Inc. can help you gain stronger profits using ERP software such as Sage 100 or Acumatica. Contact us today.