ARE DROP-SHIPMENTS GIVING YOU A HEADACHE?
Drop-shipping has become an increasingly common business model, and with good reason: it offers franchise retailers the same purchasing power and cost efficiencies. Drop-shipping also reduces delivery costs and ensures a wide selection of merchandise available without the added expense of individual delivery per supplier. Store owners benefit from cheaper purchasing prices and a competitive advantage over other retailers.
The Challenges of Drop-Shipments
Order Processing
Whilst drop-shipping is an effective means of increasing purchasing efficiencies, one of the biggest concerns that retailers face is the ordering process. From processing orders to receiving the products, the drop-shipping model brings unique challenges when it comes to the ordering process. In franchise environments, the Group offers the store owners centralised buying which allows for purchasing prices lower than the prices the store owner would receive by purchasing directly from suppliers.When the orders are delivered to the store, all the supplier invoices need to be captured into the stock management system and then recaptured into the accounting system. This wastes time and increases capturing errors.
Drop-Shipment Statement Reconciliations
Accurate drop-shipment statement reconciliations are imperative to managing your supplier liabilities correctly. When dealing with large drop-shipment statements, huge amounts of time are lost in attempting to ensure all transactions on the drop-shipment statement reconcile with your goods received vouchers. The obvious risk to retailers, is if this reconciliation process is not done accurately, statements that may contain invoices for other stores or the invoice values maybe over-stated (overcharged) or priced incorrectly go undetected. Without a proper, accurate and early detection of incorrect invoice values the store is exposed, often, to invalid and/or over-stated supplier liability. Without early detection and requesting of supplier credit notes, the retailer’s money will be tied-up in the supplier’s account, resulting in severe cash-flow challenges – losing the retailer hard-earned money.
Solutions to Drop-Shipment Challenges
The problems store owners face due to drop-shipments ultimately arise from difficulty in automating the order management and reconciliation process. By utilising an accounting solution that integrates seamlessly with your store’s stock management system (e.g. SIGMA) retailers can save time and increase accuracy by having all drop-shipment supplier invoices automatically imported into the accounting solution, all correctly applied to the correct supplier account! When a statement is delivered, the solution should allow for automated upload / import of the statement to the system and the auto-reconciling of all the statement transactions – multi-suppliers’ transaction lines – to the transactions imported from the ‘receiving / stock’ system. This saves retailers time and ensures a store does not overpay their suppliers, thereby helping to manage cash-flow. Drop-shipments demand Supplier management be a mission-critical business process.
In today’s ultra-competitive markets with tight cash-flow constraints retailers need the power and accuracy that an accounting systems designed for the new millennium. Instant Retail Accounts (powered by Sage Evolution) is an invaluable resource for businesses who utilize the drop-shipping model. Instant Retail Accounts provides a powerful integration platform, enabling any store to connect their front-end receiving and stock management systems to their back-end accounting. Instant Retail Accounts goes a step further and allows auto-reconciliation of drop-shipment statements ensuring a clean, stream-lined order process which results in better cash-flow, saves the store time and ultimately saves money!
If you want Instant Retail Accounts which is powered by Sage Evolution and used by prestigious retailers and wholesalers such as the Spar group, Liquor City and Pick-n-Pay – contact: sales@instantretail.co.za.
How can Drop-Shipments save you time and money?
