Local and multinationals, large or medium enterprises – it doesn’t matter. All of them could have deals, in which cost is higher than the deal’s net value… meaning the deal is a loss.
One of the main factors affecting the profitability of the transaction is the ratio between the cost and the final amount paid by the client. How to identify in real time, transactions, with a negative or extremely low yield?
Identification can be achieved by comparing a cost, against net value of a sales order, alerting on the deals where the material cost is higher than the net value. Enterprises, having thousands of deals, carried out on a daily or even hourly base should involve automation for such comparison.
Skywind 4C™ platform provides automated detection for negative or unexpectedly low profit deals via real-time alert, which tracks and catches deals with negative profit, sending instant notifications to business stakeholder’s mailbox. The detailed, item level data with negative profit and additional details is presented (please refer to an example of alert’s output in a picture below).
Calculation of material cost:
The cost field, used in this alert is actually a subtotal in sales order line level. The cost subtotal is a summation calculation, performed in pricing procedure with mark of subtotal “B” (Cost). In most cases this subtotal gets its value from the standard VPRS pricing condition, which contains cost of material sold.
In some cases the subtotal is customized to include additional pricing conditions like shipment costs, insurance, rebate etc. Obviously this approach will provide more accurate cost estimation and allow correct margin calculation for a specific deal.
Please refer to the alert’s output below, to see how such deal looks like and pay attention to the “Manual price” field. This field will provide you with additional insights about the reason of negative profit on specific deal.
Manual price field can get one of 4 values:
- Blank No manual price change
- A Manual change carried out
- B Condition manually deleted
- C Manual price change released
Tracking transactions with negative profit (that is, the cost of goods sold is higher than the amount of the transaction). The picture should reflect the fact that the supplier seizes money by selling at a loss.