DCS Europe, a major distributor for the likes of Procter & Gamble, Unilever and Colgate, has managed to bring in an additional £24 million of business in the last six months by impressing one of its suppliers with its cash flow software.
DealTrack allows companies to track complicated rebate cash flow mechanisms between suppliers and distributors. DCS Europe often has to sell its suppliers’ products at a loss when a supplier decides it wants to run a promotion, which it then claims back the cash for once the promotion has been carried out.
In the past, DCS had been tracking these promotions and rebates using spreadsheets, where the data was inputted manually and could take over a month to process and get the cash back in DCS’ account.
Paul Murphy, financial director at DCS, spoke to Computerworld UK and explained why the process was too complicated for spreadsheets.
“For every different supplier we probably deal with 200 to 300 different customers. What will happen is there will be a promotion on a particular product, but it will only apply to certain customers. The software has to differentiate what promotion money we need to claim, but based on sales of a particular product to a certain range of customers,” said Murphy.
“There are a lot of deals like that and it becomes complex. The key is to be able to invoice the supplier very quickly after the promotion period is over so that we can get that money.”
He added: “In many cases we have sold the product at a loss. It’s not until we claim that discount money, because our margins are relatively slim, that we start to see the profit on that transaction. When it was done manually it took a long time, because once we invoiced the supplier then we had to wait 30 days to get paid. The impact on cash flow is critical and the speed we can do all this is crucial.”
Murphy said that the total invoicing for these types of deals for suppliers has totalled more than £22 million in 2012, which is more than the company’s gross profit on the whole business. DCS has had approximately 3,500 transactions or invoices this year.
However, DCS has now implemented DealTrack, which is integrated with its core Sage 100 ERP system, and allows it to register the deals that they put in place with their trading partners, both customers and suppliers, and then automatically joins those deals up to DCS’ transactional trading information. DCS is now able to track the incomes that it is generating from those deals, and based on invoicing schedules, can automatically invoice the suppliers for the income due.
The implementation process took six months, following a period of analysis, where DCS needed to understand all the different types of deals it carries out, which was the biggest challenge according to Murphy.
Its cash flow process has been sped up to the point where DCS now has an additional £1.5 million in the bank at any given time – where suppliers have been invoiced and paid more quickly as a result – and has resulted in the company benefiting from an additional £45,000 in interest a year. Essentially, £2 million to £3 million of cash was being tied up in manual processes.
However, its suppliers are now beginning to recognise the benefits of the software and one supplier in particular (although DCS wasn’t willing to say who) has asked it to manage its promotion money, which has resulted in a significant amount of additional revenue in the past six months.
Murphy said: “Because the system works so well, it actually attracts suppliers who are getting a headache dealing with this promotion money and are asking us to manage it, which takes away a lot of their cost. This has bought us an extra £24 million worth of business in the last six months from one supplier.”
However, despite the benefits of the software, Murphy also admits that DCS is always reliant upon employees to input the data correctly and is still subject to human error.
“I think you have still got the risk of someone not putting a deal they have agreed into the system, that’s the human element,” he said.
“But once it is in the system you know that that deal will be invoiced, will be tracked, the calculations will be done at a press of a button, the invoice will be created at the press of a button, and you will have all the supporting information that you need to send to the supplier about why you are invoicing them for £5,000 or £105,000. That’s all done more or less automatically, rather than on spreadsheets and print outs.”