Post Cost of Unplanned Inventory

How much of your cash is tied up in inventory? For many companies, simple response will be “a lot”. Not planning for inventory will always lead to inefficiencies, without regard to if you are keeping too much inventory or too little.

If you are keeping too much inventory, there are several reasons it isn’t a good idea:

1. Too much of your money is tied up in inventory. Even with the low-interest rates of today, money in bank is better thank money tied up in inventory.
2. Cost of storing and securing inventory adds up. Cutting down on inventory could reduce the need for space ($), need for security ($), need for maintenance like heating, cooling, etc ($), and there is no spoilage ($$$).
3. Makes your number look bad than they need to be. Your inventory turn over would be low (inefficiency), return on asset will be low (underpricing your company), and makes other metrics looks not so pleasing.

On the other hand, too little inventory have its own set of problems.

1. Lost sales because there isn’t sufficient inventory to meet orders. Perhaps the worst but don’t let feel of lost sales lead you to overstock.
2. Unhappy customers because of back-orders or long wait time to receive purchases.

So what is the game plan to avoid both sets of problems. It boils down to a strategy of tying your sales process and your procurement and managing processes.

1. Foremost, understand and track your lead times. If inventory is available, how long does it take to fulfill, ship and ensure products are received by end clients? How long does it take to receive parts, sub-components or merchandise-for-resales? This is the starting point.
2. Forecast, forecast, and forecast. It is important to forecast what sales volume will be in the near term (we will cover forecast in the near future.) Overtime you should become very precise in your ability to forecast near term demand.
3. Know your industries cycles. If you have a period of higher sales, plan for it.
4. Keep a narrow buffer for just in case. And emphasis here is on “narrow”.
5. Actively manage procurement. Many companies make large purchase so that they reduce number of purchase that have to be made.

There are several well documented methods for both forecasting and managing inventory purchase. My favorite is on Economic Order Quantity, but it might not be suitable for smaller organizations.

In short, not planning for inventory could easily result in hidden costs and missed opportunities for your business. Strategize, systemize, and execute.

Salaad Nur
Cloud Accounting “Thinker”

Revenue Recognition – An Increasingly Hot Topic

A hot topic around water coolers in the accounting department these days is revenue recognition.  We hear this issue coming up in many different vertical markets now, but it seems that the software & high technology industries have a particularly significant challenge in this area.  Consider a software company who, not only sells products but usually professional services as well.  Then take the sheer volume of deals that some firms do, add incentive programs they may provide and multi-year contracts, and properly recognizing revenue becomes a significant challenge to the accounting team.

What’s ironic is that when revenue recognition is done properly, you never hear about it.  When companies have tools in place and a procedure in which to handle the process, it’s not a big deal.  Where it becomes a very big deal is when companies do not have the proper technology, process or staff in place and aren’t managing it properly.  The ramifications can be severe, ranging from sanctions and fines levied by the court, to convictions and possible jail time in severe cases.

We have been asked by our clients to do a few different things to help them remedy this issue.  Not only do most want a tool or tools put in place that will properly help manage these tasks, but they also ask us to help them streamline and simplify the workflow surrounding these processes and most would like as much of the process as possible to be automated by those tools.

If you or your company needs help in this area, or if you’d like to know more, you can contact me at james.solomon@avankia.com.   If you’d like to read more on this topic, let me know and I will provide that to you as well.  http://www.avankia.com/netsuite_consulting

Salesforce Product Schedules & Recurring Invoicing

Integration with Salesforce.com Product Schedules is now available !!!

Lot of customers have been asking us for supporting Product Schedule for recurring invoicing and billing, and now we have the support for it.

Who would benefit from it

• Firms providing Software Subscriptions based products and services.
• Publication firms – magazine, online content, elearning etc
• Services companies providing utilities like waste management, telecom, insurance, day care and others
• Healthcare firms providing on-going services like weight management, home-health and others

How does it work

• Setup your product schedule as you would normally setup in Salesforce. Setup your dates and occurrences
• Setup up scheduler to run every day, week or month. The scheduler provided calculates the next invoice date and updates the next invoice date (custom) field in Opportunity. Use a workflow to update the Generate flag for next invoice.
• You are done!!! DBSync will pickup all invoices as the dates come due and will generate Invoice, Sales Order, Sales Receipt as per Generate Field in opportunity.
• This setup can easily be extended to address most of the business processes around recurring invoice payments.

Installation:

• Login to DBSync
• Click on Library
• Add the process library for Recurring template and use the installation document to install the application.
• Once you install the application, setup the scheduler provided in the installation to match your billing cycle
• As the scheduler runs in the interval assigned, it will mark the corresponding opportunity to generate one of the accounting documents like Invoice, Sales Receipt etc.
• The next time DBSync runs the invoicing process, it will pickup all the Opportunities and process it for invoicing as per setup for Invoice or Sales Receipts.

Please feel free to contact us at support@avankia.com or call 1-877-739-2818 to get more information.

Turn your salesforce into a BI solution

The key problem one of the Radiology – healthcare providers was facing was visibility to their referral information. They were using Net.Orange, and was proving to be quite expensive.

To run their day to day operations, they were using Amicas a leading EMR/Radiology Information System, which managed patient scheduling, physician information and all details other than the billing information, which was managed by another system. While it contained all key data from referral standpoint, they were unable to understand and related referral activities to that of physician liaison and outreach activities.

We used Healthcare CRM: Physician Relationship and Referral Management module built on force.com and were able to quickly setup the sales and marketing end of it. The key still remained to extract information out of the EMR and scheduling system. We had couple of options

Options:

1. Leverage HL7 – HL7 is an event driven protocol and two transactions namely ADT (Admit – discharge) and SIU (Scheduling) was relevant in this case. The issue was that not elements were passed through with the transaction – like complete referring physician information or diagnosis codes and we were not able to extract historical data as it was needed for forecasting future referral.
2. Perform an export in flat-files and manually import it. While it sounded like was in-expensive way to do it, it was quite expensive in the long run. Also, we had seen a drop in usage as folks would forget to perform import.
3. Automate data extract and import of data using DBSync. We were able to tap into the SQL Server and construct views for each of the data sets required for our analysis. We then scheduled data extracts every 15 minutes with the built in scheduler and push to force.com.

Analytics:

While Force.com has built in reports, dashboards and workflows, it does lack some statistical calculations like variance and drop offs. We added real time calculations on a number of statistical calculations required for analysis using APEX – an on-demand programming language for force.com. These routines would run at either real-time to process referral statistics as it came through the integration or run every day at a scheduled interval.

The end result was an on-demand data warehousing and analytical tool to provide clear real-time reports and dashboards, along with workflows to automate notifications of referral drop offs by physicians or new physician referrals.

For more detail check out http://www.avankia.com/healthcarecrm_prm

Cloud integration- EDI and API ?

There are an ever growing number of companies offering EDI + API that stirred up some thought:

Having worked with GXS, one of the leading EDI VAN services, I felt I should provide my readers with some background – EDI or Electronic Data Interchange is a B2B protocol used by major business to automate their supply chain. These standards pre-date the WebServices days and were designed to be compact messages designed to save bandwidth and are governed by standard committees (ANSI, EDIFACT or TRADACOM).  These  B2B documents represented an invoice, acceptance notification and many other pre-defined forms.

EDI offers major savings over large corporations like Walmart or JC Penney who wanted to streamline their businesses and normally have large partner networks.  Standardizing and integrating businesses between Hub (the Company) and Spokes (all the partner suppliers) is a win-win for everyone and ends up being a cost to Spokes to choose to do business with the main Hub.

The Spokes are smaller firms. They choose EDI because the Hub asked to do so. Will they internally adopt EDI?  Maybe / maybe not.  As most firms, internal applications are integrated or can be connected by building bridges between applications.  In today’s world, they will very likely invest in integration tools which connect directly to each other.  To integrate with the Hub, they would go with an EDI VAN service like GXS, buy a tool to map and transform their internal representation of Invoice or other documents and send it through to them as EDI, using a prebuilt transfer protocol like FTP/S, EDI*Express or others.

Now let’s look at an Integration provider building an offering in API+EDI. It would make sense to me if the Integration Provider -

• Had a trading partner hub so that it made sense for Spokes to join in – or if they don’t have an offering of a hub,
• Offered an integration platform for Spokes to transform their documents in EDI and push to the network – seamlessly.
• Sold to the Hub an offering to replace EDI VAN services, and move to become a front-end to them for receiving EDI.  In this case, the Integration Provider should have a good strategy to upgrade the connector software for all Spokes.

So what I am getting to is that a firm will have difficulty making headway by only providing a way to transport EDI over an API without providing a value proposition to either the Hub or the spoke.  In this case, perhaps I am missing something.

I feel a better strategy we be to provide a built-in integration with Accounting or ERP packages to EDI.  This will certainly address the major concerns for the Spokes and increase traffic to the EDI Trading Grid / Network or connect with the Hub directly.  This is why a solution like DBSync makes the solution complete, as it connects to the accounting systems, provides mapping capability, and transfers to Hub in the form they need.

Please do jump in with your views…

Analytics Best Practice: Order-to-Cash Performance Measure List

I am often asked as to what are the relevant reports or metrics we need to track while integrating between Order-to-Cash process. Here is a list of reports that you will find useful while thinking through your business integration needs – mainly between CRM or eCommerce applications like Salesforce.com and Accounting systems like QuickBooks, Intacct or others.

Performance measures for assessment the overall order-to-cash process, order entry-billing, accounts receivable, credit and collections, and inventory accounting.

Order-to-cash

• Total order-to-cash process cost as a percentage of revenue
• Total order-to-cash process cost per order-to-cash FTE
• Days sales outstanding (DSO)
• Operating cycle
• Percentage of order-to-cash key controls that are automated

Order entry – billing

• Total order entry – billing cost as a percentage of revenue
• Total order entry – billing cost per order entry – billing FTE
• Total order entry – billing cost per customer invoice
• Order processing cycle time
• Order-to-fulfillment cycle time
• Order-to-bill cycle time
• Number of days between shipment or service and billing
• Order-to-cash cycle time
• Number of customer invoices per order entry – billing FTE
• Order entry – billing span of control
• Percentage of order entry – billing FTEs in shared services
• Number of separate order entry locations
• Number of separate billing locations
• Number of separate instances of order entry systems
• Number of separate instances of billing systems
• Number of separate customer master files
• Percentage of customers on standard terms

Accounts receivable

• Total accounts receivable subprocess cost as a percentage of revenue
• Total accounts receivable subprocess cost per accounts receivable FTE
• Total accounts receivable subprocess cost per receipt processed
• Total accounts receivable subprocess cost per customer invoice processed
• Average days unapplied cash
• Percentage of customer receipts received electronically
• Methods used for collecting receipts
• Number of receipts per accounts receivable FTE
• Number of customer invoices per receipt
• Percentage of errors in posting receipts
• Average number of days from customer-initiated deduction to resolution
• Accounts receivable span of control
• Percentage of accounts receivable FTEs in shared services
• Number of separate accounts receivable locations
• Number of separate instances of accounts receivable applications

Credit and collections

• Total credit and collections subprocess cost as a percentage of revenue
• Total credit and collections subprocess cost per credit and collections FTE
• Total credit and collections subprocess cost per past-due account
• Total credit and collections subprocess cost per account placed for third-party collection
• Bad-debt expense as a percentage of revenue
• Average days of past-due accounts
• Percentage of invoices paid within bill period- value
• Percentage of invoices paid within bill period- volume
• Average number of days until an invoice would be considered past due
• Average number of days until an invoice would be placed for third-party collection
• Average number of days until an invoice would be written off
• Credit and collections span of control
• Percentage of credit and collections FTEs in shared services
• Number of separate credit and collections locations
• Number of separate instances of credit and collections applications

Inventory accounting

• Total inventory accounting cost as a percentage of revenue
• Obsolescence write-offs as a percentage of revenue
• Annual inventory turnover
• Days inventory on hand (DIO)
• Days to compile year-end inventory
• Number of separate inventory accounting locations

11 Reasons why Customers want to integrate or outgrow QuickBooks

While Quickbooks is a boon to small and medium businesses, you hit a wall as you grow to what all you can do with it. This is a list of few points that companies face and require either integration, data extracts or even a reason to upgrade to a more sophisticated accounting package.

1. Requirement for segregation of duties and stronger financial controls
2. Need for improved visibility, actionable data, robust reporting and analysis
3. Limited Chart of Accounts hinders necessary reporting formats
4. Seeking stronger scalability, availability, security and auditability
5. Need to improve business efficiency via automation
6. Need to systematize business processes
7. Requirement to manage multiple currencies and/or multiple business units, consolidated financials
8. Requirement to integrate with other key systems
9. Concurrent / distributed use by more users
10. Concern for performance, extensibility, scalability and reliability
11. Extensive reliance on Excel spreadsheets to prepare financial statements & overcome other shortcomings of QuickBooks