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How Back Office Bookkeeping and Data Analysis is Shaping the Future of Wholesale

As a wholesale company owner, you want to be in a winning position to grow your company. To do that, you need to have the right number crunchers on board. They prepare the reporting you need to make critical decisions in real-time. Your biggest concerns? To protect and increase your profit margins. How? You can with the backbone of your business: your back office bookkeeping staff backed by an on-staff development team that delivers critical and accessible information.

Add the team of data analysts who provide you with frequent reports you need to get insights on every aspect of your wholesale business, and you have the means to shape the future of your wholesale business.

Back Office Bookkeeping Because Financials are Not Enough

Watching your overall company profitability is a critical accounting function. Annual financial reporting like your balance sheet or profit and loss statement are important reality checks, yet they don’t help you in your everyday decision-making. Quarterly or even monthly financials still don’t give the wholesale executive the tools they need to make critical, timely decisions.

Monthly or quarterly financials are also critical accounting functions but can be represented by too narrow of a time period to be meaningful for a wholesale business that has lots of ups and downs.

As a wholesale company, you need the reliability of frequent reports from your data analysts since they can provide you with the insights that can help you get a better grasp of your true financial status.

A good back office bookkeeping team can design reports that segment your business into meaningful categories and deliver value-added reports to a wholesale executive when you can still do something to change outcomes. Having access to data in real-time is moving into the way of gaining the insights you’ll need. Why wait for reports that used to take time to obtain when you can have your information right away to make informed decisions?

Segmented Real-Time Reporting is Vital

Segmented real-time reporting in your wholesale business is crucial. You have to view your company through several lenses in order to get the best insights. You need timely reporting that can help you adjust your strategies while there’s still time on the clock or so you can call an audible when necessary.

When you take advantage of comprehensive reports designed by your software development team and analyzed by your data specialists, you receive information that communicates crucial information that can cover specified time periods, whether they’re daily, weekly, monthly, or quarterly.

Inventory Segmentation is Key

Segmented real-time reporting is also a key tip in managing your inventory. The problem is that not all inventory is created equally.

When you decide to segment your industry reports, this becomes a crucial way to find and resolve current problems. In dealing with Ecom, FOB China, POE, and LDP goods, these have different operational procedures and lifecycles that must be monitored individually.

When you customize your inventory control for each type of process, you’re able to realize the benefits of leaner inventory positions.

ABC Segmentation for Inventory Control

Managing your inventory, you want leaner inventory areas, and this is where an ABC analysis comes in. This classification is based on ranking the items by the product of each item’s annual demand and its unit cost. Typically, approximately 20% of items account for about 80% of the total annual dollar usage.

This method is an inventory categorization method where you divide your products into three categories based on decreasing order of annual dollar volume that is the price multiplied by projected volume – A, B, and C.

“A” represents your most valuable items, while “C” represents the least valuable. ABC segmentation is used to direct a wholesaler’s attention on the critical views.

Broken down further, the classes of the segmented goods would look like this:

Class A – This represents 10-20% by the number of items and 50-70% by projected dollar volume. These are your most valuable products.

Class B – This represents around 20% of the number of items and about 20% of the dollar volume. These are your middle-of-the-road products.

Class C – This represents about 60-70% of the number of items and 10-30% of the dollar volume. Most of your goods will live here, so you need to move these as quickly as possible.

You’ll use ABC segmentation to form your Product_Customer matrix using the same-as or combinations of your products and customers. For example, a_A=”A”, b_B = “B”, and c_C = “C”, and so on.

Once the data is broken down into segments, you can have a better focus on that data and use it in a meaningful way. When data is broken down, any problems can become more noticeable. It also helps in deciding how to prioritize the various segments.

Going from there: Reporting

Your data analysts have one goal: make your reports relevant and easy and less time-consuming to read and interpret. You need numerous reports from your data analysts:

  • Item level margin reports
  • Product category margin reports
  • Account specific margin reports
  • Division level margin reports
  • License and brand level margin reports
  • Landed business margin reports
  • FOB overseas margin reports
  • Direct to consumer margin reports
  • Assignment of Receivables and Factoring of Receivables reports

These reports can help you track—and reduce—your AR dilution so you can maintain healthier profit margins. Otherwise, the greater the amount of dilution, the greater the risk to your factor, the lesser the funds you are provided for your borrowing.

When a wholesaler is hit with chargebacks, this gets moved back to you. This means that the factor stops collecting and doesn’t fight the chargeback. Now, you’re responsible for collecting on the invoice.

It becomes the wholesaler’s responsibility to keep track with a separate and current non-factored AR aging book. In the event of a vendor non-delivery claim, factors will try to provide proof of delivery and will give you several days to provide your own. You need to keep your own books for comparison. In other words, don’t rely on the factor’s books. In addition, be sure you perform a monthly factor reconciliation.

When you have the proper reporting system in place, this will enable you to have improved communications with your factor, as well as the ability to upkeep your invoices and assign them to a factor. That means your rates are lower and the cash flow available for your company are favorable.

Win the Game for Your Wholesale Company Through Your Back Office Bookkeeping, Development, and Analyst Teams

Your back office team needs to design your data input processes properly. Then your back office bookkeeping—teamed up with smart on-staff software developers who understand how you utilize data—can deliver reports that are useful in your day-to-day operations.

They can create a solid base from which your company can grow. It’s an increasingly crucial part of your wholesale company.

Wholesale Executive Insider is a publication dedicated to helping owners of wholesale companies stay up-to-date with the latest industry insights to improve their operations and increase their bottom line. If you’d like to get free advice and recommendations, feel free to book a time to speak 1-on-1 with one of our knowledgeable industry advisors!

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