2013년 11월 25일 월요일

About 'erp accounting systems'|Example of Integration of Microsoft CRM with ERP system (Dynamic C5)







About 'erp accounting systems'|Example of Integration of Microsoft CRM with ERP system (Dynamic C5)








Want               to               learn               a               quick               and               simple               way               to               read               your               business               profit               from               a               financially               efficient               way?

You               might               be               one               of               those               large               proportion               of               small               companies               that               lost               thousands               of               dollars               when               looking               only               at               'the               whole               picture'               and               ignoring               the               micro,               and               you               just               didn't               notice.
What               you               are               about               to               read               is               the               outcome               of               my               20-years+               experience               as               a               finance               professional               working               and               advising               multinational               companies               and               local               large               businesses               in               several               countries,               so               I               guarantee               you               this               is               not               going               to               be               boring,               at               all.
All               you               need               is               logical               thinking,               a               bunch               of               enthusiasm               an               just               intermediate               knowledge               on               spreadsheets               (or               someone               who               give               a               hand               on               this).

No               complicated               and               expensive               ERPs               (systems).

Why               does               my               business               need               a               'Profit-per-brand'               model               ?


               According               to               statistics               published               by               the               Small               Business               Administration,               a               government               office               in               the               US               (www.sba.gov),               a               significant               proportion               of               small               businesses               fail               in               their               early               years               because               of,               among               other               reasons,               the               so-called               'poor               management'               in               which               I               include               the               'whole               picture'               view               of               the               business               and               ignoring               how               critical               the               micro-finance               is               impacting               your               performance.

I               will               put               it               simple:               Let               us               say               your               revenue               portfolio               is               composed               by               10               brands               with               a               variety               of               sales               volume,               margins,               distribution               and               post-sell               costs.

By               the               end               of               the               month               your               finance               department               has               provided               you               the               P&L               figures               and               you               are               celebrating               because               all               your               goals               (sales,               cost,               expenses               and               -more               important-               bottom               line)               where               achieved,               on               top               of               a               comfortable               growth               versus               last               year.

And               so               your               marketing               and               sales               people               get               paid               and               everyone               around               is               happy               for               the               results.

That's               nice.


               But               the               above               is               a               reality               I               have               seen               so               very               often:               In-betweens               are               dangerous,               as               there               are               brands               that               can               be               eroding               value               to               the               business,               either               by               generating               losses               or               perhaps               profits               below               the               desired               level               and               the               same               could               happen               when               you               think               of               your               customers               portfolio,               a               reality               that               you               hardly               see               if               you               don't               pay               attention               to               micros.

The               reason               for               this               is               quite               simple:               Indirect               cost               and               expenses.

Easy-to-understand               examples               of               that               are               customer               service               expenses,               post-sale               service               departments,               distribution               and               logistics               and               administrative.

You               pay               them               all               to               serve               the               entire               company               so               they               don't               work               for               a               single               unit,               brand               or               customer.


               Then               the               only               way               to               avoid               losing               money               is               to               'allocate'               all               those               indirect               expenses               to               see               where               we               earn               and               where               we               lose               benefits,               which               we               will               achieve               only               by               establishing               a               simple               model               to               see               a               P&L               (from               revenues               to               EBITDA               and               Net               Results               or               post-tax,               post-finance               costs)               for               each               of               our               brands,               or               at               least               for               those               that               are               more               relevant.

And               of               course               the               next               and               obvious               step               is               to               make               decisions               on               what               we               want               to               sale               and               what               we               want               to               de-list.


               Some               may               argue               that               they               already               know               how               much               they               profit               from               a               brand:               'I               know               my               margins               as               I               know               how               much               I               pay               my               suppliers               and               of               course               I               know               my               price               to               customers'.

But               I               get               them               convinced               how               wrong               they               are               with               this               only               question:               Do               our               shareholders               receive               margins               or               do               we               need               to               spend               beyond               that               line               of               the               P&L               before               they               get               paid               ?
               Step               1:               Get               your               brand               portfolio               "prioritized"               and               think               it               strategically               
               The               first               step               of               this               model               is               to               be               clear               of               what               is               relevant               and               what               is               not,               based               on               strategic               reasons.

The               portfolio               of               our               brands               and               categories               should               be               grouped               into               three               main               roles:               Core               brands,               Flankers               and               Cash-Cows.

In               order               to               assure               long-term               success               and               sustainability               of               the               way               we               will               manage               our               portfolio,               it               is               a               must               that               these               roles               are               agreed               at               the               highest               level               of               the               company:               Close               discussion               and               agreement               by               Marketing,               Sales               and               Finance               directors.

Missing               only               one               of               these               guys               will               mean               lack               of               commitment               at               management               /lower               levels               and               therefore               a               high               risk               of               fail.


               Core               brands:               Are               the               fundamentals               of               our               values               and               our               strategy,               and               which               we               want               to               grow               and               to               gain               the               largest               market               share               possible               and               they               are               usually               the               highest               profitable               brands               in               our               portfolio.

Nevertheless,               the               strategy               could               agree               that               at               some               point               in               time,               either               at               the               beginning               of               their               lives               or               at               a               given               moment,               some               of               the               core               brands               will               not               be               profitable               due               to               long-term               reasons               like               the               need               of               extensive               innovation               investment               that               are               key               to               the               success               of               a               brand,               or               perhaps               a               re-launch               that               will               need               significant               advertising               and               promotional               costs.

But               of               course               it               is               obviously               expected               that               that               is               a               temporary               moment               in               the               life               of               a               core               brand.


               Flanker               brands:               Once               we               have               set               out               our               strategic               portfolio,               we               now               need               someone               who               will               be               willing               and               ready               to               defeat               them               from               competitors               entering               a               strategic               price-range,               and               this               is               the               role               of               a               flanker.

They               are               brands               that               are               aimed               to               be               less               profitable               than               the               core               but               play               a               key               role               in               the               portfolio               and               they               are               often               of               lower               quality               and               lower               prices               than               the               core               and               destined               to               play               clear               roles               versus               specific               competitors               in               specific               categories               in               clear               geographies               and               markets.

To               learn               more               about               this               topic               and               to               gather               some               good               examples,               I               recommend               a               study               published               by               Iowa               State               University               in               2010               (see               link               below)               by               Nancy               Giddens               and               Amanda               Hofmann.


               Cash-cows:               A               third               group               of               brands               are               those               that               don't               fall               into               any               of               the               other               two               groups,               but               we               want               to               maintain               as               they               bring               some               sort               of               'supplement'               to               some               categories               or               they               may               be               a               key               to               enter               some               markets               and               customers               with               other               core               brands.

It               is               clear               for               us               that               all               we               want               is               to               get               from               these               brands               as               much               cash               as               possible;               so               these               brands               are               profitable               as               long               as               we               don't               invest               significantly               in               ad               and               promo.

This               should               be               the               last               category               and               I               would               expect               there               be               no               brands               without               a               category               of               these               three:               The               role               has               to               be               clear,               otherwise               there               is               no               reason               for               a               brand               to               exist.
               If               you're               asking               yourself               what               this               section               is               for               as               we               are               to               build               financial               numbers,               my               answer               is               that               in               order               to               be               able               to               set               solid               and               logical               financial               goals               for               our               brands               we               must               understand               what               their               role               in               the               strategy               and               the               portfolio               is               and               that               is               just               what               we               do               when               we               perform               the               step               #               1.

But               beyond               numbers               and               analysis,               this               is               in               itself               a               good               exercise               to               get               finance               people               involved               closer               to               the               business               and               thus               get               them               prepared               to               accompany               the               business               in               the               journey               to               success.
               Step               2:               List               all               expenses               and               cost               that               are               not-brand-direct               
               Once               your               portfolio               is               clearly               set               and               agreed               at               the               3               parties               level               I               have               recommended               above,               then               it's               time               to               list               all               those               expenses               that               ordinarily               are               not               specific               to               a               brand.

These               expenses               are,               as               I               mentioned               before,               typically               related               to               logistics,               distribution,               customer               service               and               post-sale,               and               administrative               but               there               could               be               more               so               your               finance               /accounting               team               can               be               of               great               help               here.

Again,               finance               /accounting               people               can               give               a               hand               on               this.
               Step               3:               Agree               how               will               you               "charge"               your               brands               (criteria)               
               Another               key               component               of               this               model,               is               to               agree               the               so-called               'Allocation               Rules',               which               means               a               criteria               on               which               we               will               base               to               'charge'               the               cost               or               expense               to               each               of               our               brands               in               the               portfolio.

The               criteria               can               be               set               on               a               wide               range               of               alternatives               and               they               will               depend               on               the               type               of               business               we               are               in               but               you               can               pick               some               of               these               examples:               
               -               Sales               volume:               either               $               or               tons,               units,               pallets,               thousands               of               cans,               etc.


               -               %               of               time               that               a               certain               area               usually               renders               to               a               brand               or               category               (or               to               a               customer               or               group               of               customers               who               distribute               our               brands),               according               to               records               a               given               area               keeps               
               A               good               practice               is               to               make               a               final               check               that               you               have               taken               all               your               COGS               (cost-of-goods-sold)               and               SG&A               (sales-general-administrative               expenses)               versus               what               you               usually               have               reported               in               your               total               business               P&L.


               Be               careful               to               consider               expenses               that               are               indirect               although               they               are               not               centrally               incurred,               e.g.

regional               units               located               outside               the               headquarter               country               or               state.
               Step               4:               Timing               and               Reporting               rules               
               Now               it's               time               to               agree               the               'views'               we               will               give               to               the               analysis               by               answering               the               following               questions:               
               -               Do               we               want               to               compare               versus               prior               year               ?


               -               Do               we               need               to               compare               to               our               budget               ?

(I               assume               you               know               how               important               planning               and               budgeting               is               for               the               business).

Bear               in               mind               what               could               be               obvious:               Should               you               want               to               compare               to               a               budget,               then               you               need               to               have               a               budget               that               complies               with               this               request,               that               is,               structured               and               organized               on               a               P&L               per-brand               basis.

For               starters,               I               would               suggest               to               see               only               actuals               versus               prior               year               and               let               the               budget               for               a               2nd               level               once               you               and               your               management               team               has               adapted               themselves               to               the               new               way               of               measuring               the               business.


               -               Do               we               want               to               see               all               our               brands               or               only               the               core               and               the               flankers               ?


               -               Who               are               the               main               destinations               ?

Will               we               share               this               strategic               and               sensitive               info               with               all               around               ?
               In               the               event               that               your               business               has               operations               in               several               states               or               countries,               you               may               consider               splitting               the               analysis               according               to               these               needs               but               that               will               of               course               add               complexity               on               calculations               and               reporting               so               you               may               want               to               leave               this               action               for               a               second               stage               of               implementation.


               Another               key               point               to               consider               is               to               have               someone               responsible               for               this               analysis               who               will               also               play               a               role               of               partnering               to               Marketing               and               Sales               departments               so               that               they               understand               and               learn               how               to               read               the               figures,               reinforce               the               'allocation               rules'               as               well               as               providing               them               supplementary               /additional               information               to               explain               what               is               impacting               either               positively               or               negatively               the               overall               results               of               a               brand               or               category.

When               it               comes               to               finance,               the               responsibility               is               to               timely               provide               information               others               find               accurate               and               useful               to               make               decisions.
               Step               5:               Action               and               get               the               opportunities               !


               It               will               be               useless               all               the               effort               we               will               put               into               setting               up               the               model               if               we               don't               follow               up               or               we               don't               use               all               this               information               to               make               decisions.

So               bear               in               mind               the               following               recommendations:               
               -               Set               up               a               period               and               date               to               report               and               discuss               at               appropriate               level.

Quarterly               rounds               are               usually               effective               
               -               For               every               round               there               should               be               specific               actions               agreed:               Some               examples               of               actions               can               be:               A               brand               manager               will               explore               /analyze               the               volume               mix               per               SKU               on               his               /her               brand               which               is               affecting               the               overall               brand               revenues               so               that               he               will               identify               what               to               de-list               and               where               to               raise               prices.

Logistics               will               propose               some               actions               to               reduce               shipping               cost               per               ton               on               a               brand               that               has               been               affected               by               high               cost               of               transportation.
               Some               good               practices               I               have               seen               when               implementing               a               profit               per               brand               model:               
               -               Top               management               is               committed               and               engaged               with               the               new               brand               profitability               scheme.

They               publicly               reinforce               the               need               of               measuring               performance               at               this               level               on               group               meetings               and               key               company               events               
               -               Marketing               managers               are               held               responsible               for               the               full               P&L,               from               revenues               to               EBITDA.

They               will               present               quarterly               results               to               the               Board               and               their               brands               profitability               is               just               a               view               of               their               overall               personal               performance               
               -               When               launching               a               new               brand               or               category,               P&L               per               brand               is               a               critical               part               of               the               'go'               requirements               and               check               list               
               -               Agree               a               link               between               management               pay               and               brand               profitability               objectives.

Clear               goals               of               profit               per               brand               
               -               Benchmarking               your               numbers               versus               your               peers,               at               the               available               level               
               -               Set               goals               to               improve               your               last               year               in               a               specific               target               (x%)               for               current               year               and               next               3-5               years               
               -               Establish               'stop-loss'               limits               for               a               brand               or               category.

This               should               lead               to               hard               decisions               on               a               low-performer               
               -               Relevance               to               the               model               is               paramount               and               we               invest               in               IT               capabilities               to               expand               and               improve               the               P&L               per               brand               structure               
               -               The               state-of-the-art               models               are               based               on               an               appropriate               ERP               (transactional               system)               and               cost               and               benefit               centers               coding               structures
               
               Hope               this               tool               helps               to               improve               your               business.

Your               comments               are               highly               appreciated               at               mquiteno@yahoo.com







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