4 Ways Analytics Can Boost a Distributor's Cash Flow
Being a middleman is a tough place to be. Distributors often find themselves “caught” between suppliers that want the shortest payment terms possible and customers who want to take their time paying their bills. This and other factors can create significant cash crunches for distributorships that don’t pay close attention to margin, inventory levels, sales, and expenses. Keeping a close eye on certain metrics, then, is crucial for distributors to improve their cash flow. Here are a few ways analytics within TrulinX can help.
Tracking Actual vs. Estimated Costs
While having the correct parts is important for an industrial distributor, making sure you can accurately track costs at all times is just as vital. Many companies don’t realize how much money they are losing by not accounting for all expenses, including ones that were underestimated. Over time, small costs that seem minor can quickly eat away at your margins.
With the TrulinX software, accurately tracking both your actual and estimated costs becomes even easier. Not only does the platform make sure that you can add in estimates for things such as labor and time, but it also provides you with a comprehensive picture of your actual and estimated costs. Having a clear and more accurate snapshot of each of your work orders will then help you maximize your gross margins and boost cash flow.
Forecasting Customer Demand
For industrial distributors, the fluctuation in customer demand is something that needs to be monitored closely. Especially in the age of COVID-19, shifts in demand can change quickly. Without the ability to respond quickly and adapt, it can become difficult to maintain a healthy cash flow. One way to stay on top of this ever-shifting metric is by utilizing cash flow predictive analytics to extract historical and transactional data that will help you predict product demand.
Demand calculation methods, such as Exponential Smoothing and Rolling Period Average, are just a few ways TrulinX can help with forecasting and projections. TrulinX also enables you to view current and historical levels each month, while filtering out abnormal demand to keep your data clean.
Maximizing Vendor Rebates
In today’s marketplace, industrial distributors are facing competitive pressures to keep costs low while maintaining good relationships with suppliers. For most distributors, establishing a rebate program with major suppliers is a great idea. Not only does it allow you to sell items at, near, or below cost to premier customers, but you may also be able to recoup a reasonable margin with the help of a supplier rebate.
The unfortunate reality, though, is that distributors end up leaving money on the table by not capitalizing on these rebates. A study conducted by Deloitte found that many distributors have a significant gross margin leak in their management of vendor rebates. Oftentimes, this can be traced back to distributors not managing their rebates as if it were a business. One way to help close this leak is through the use of software and technology that makes maximizing rebates easy.
TrulinX software provides a comprehensive rebate system that is designed to track every component in the entire assembly throughout the warehouse. Currently, there are a total of five rebating methods available, including:
- Percentage of Replacement Cost
- Percentage of Vendor List Price
- Percentage of Order Price
- Guaranteed Margin Percentage
Calculating Buy Quantity and Stocking Levels
One of the best ways of boosting cash flow is through the management of buy quantities and stocking levels. By maintaining optimal levels of inventory, you can keep your on-hand costs low while still being able to meet customer demand. Distributors who take advantage of the TrulinX software for inventory management can calculate the minimum stocking levels and maximum buy quantities on various items. Distributors can also easily keep the overall costs down on items that are either stagnant or not performing as well as forecasted.
Within TrulinX, you will have various buy method options ranging from high flexibility (Min/Max) to a more controlled approach (EOQ or Target Turns). There is also an Order Up To method that will assist you in minimizing inventory levels with low demand, while maintaining enough stock to fill the orders that do come in.
These are just some of the many ways TrulinX can help industrial distributors boost cash flow. To learn more about Tribute's industry expertise and how TrulinX software can benefit your organization, request a demo today.