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Cost of goods sold

Your situation

Your sales staff has been working at an incredible pace in recent years. So many requests, so many quotes. In fact, all this work has produced quite a few deals, but you can’t actually say, as yet, whether they’ll be extremely profitable. The margins are often quite small and you regularly come across orders that will incur a loss. What’s more, they tend to appear just when you lack the resilience to deal with them.

The sales management’s quarterly analyses indicate that your margins for a considerable number of deals could have been much larger, while many other deals went to your business rivals at the last minute. It looks as if your sales employees could have brought in much more if they had been a bit more flexible. It’s a pity, because then your production would not have been idle quite so often. Don’t you wish those deals had gone through?

You want to steer your company towards larger margins and more lucrative deals because it’s more efficient – not more volume, more quality. This would also give the management more control. But it takes a lot of time to understand the exact underlying costs of, and relating to, your products for each potential deal. It means conducting full studies, which can become bottlenecks when things are hectic. As a result, the management tends to be cautious about approving discounts, scared as they are of dropping below the cost price. This makes it an recurrent problem.

The solution

Sofon enables you to view the cost price of your products any time you want. The sales reps that negotiate with your customers are aware of the costs of the materials and the purchase costs of your products and the costs of labor put into them, and other cost aspects, such as transport, packaging, and services also become clear. That means the sales rep will always know how much freedom they have to negotiate and steer the quotes towards achieving the largest possible margins and preventing unnecessary orders that end in losses. Obviously, the same holds true for the managers who approve the prices. Using Sofon, then can make well thought-out decisions and decide, by deal, how far to go with the prices.

Management can control it all at the overarching level. Accepting smaller margins might be more important in some periods than focusing on getting the most from every order, such as when times are tough. Or it might be more important to keep your production going or to challenge your rivals. Perhaps you want to introduce new versions of your product and use up the previous versions as quickly as possible. With the overview that Sofon provides, you can direct your company proactively and make these types of policy decisions based on careful deliberations.

The advantages for you

  • You can avoid smaller margins when you can achieve larger ones.
  • You can avoid being too expensive due to a lack of transparency and consequently losing large numbers of orders to your rivals.
  • At a higher level, you can ensure that your quotes prioritize your company’s best interests at that time.

This may also interest you

As an addition to your costs of goods sold, you can improve all the other aspects of quoting and contracting by introducing smart processes: quote creation, quote management, sales negotiation management, discount/rebate management, contract creation, contract management, authorization and approval, revision and version management and revenue recognition.