7 hidden costs of best of breed TPM systems
Anyone who is ever going to write or speak about the challenges with integrating a “best of breed” trade promotions management (TPM) system with your enterprise resource planning (ERP) system is probably, and rightfully, going to focus on a single topic: the cost and complexity of the integration effort. But that’s already been done before so in this article, I have a different take. Because frankly, there are a lot of costs to maintaining a separate TPM system that probably go unnoticed. Here are seven:
- Timeliness – With an external TPM system, the issue is not just the cost of moving the data between the systems. You have to consider the timing and the impact on downstream activities as well. I worked with one company that synched the data nightly, which is pretty common. So the accounts receivable clerk had to create the deduction during the cash app on Day 1, then wait until the next day to write it off in the deductions system. That’s handling every deduction at least twice.
- Off-invoice deals – Obviously the off invoice deals need to be synched back to the ERP system for sales order entry. Ever have a sales rep that was a little late getting a deal in? The timing creates a greater window for an incorrect order price, which of course will probably lead to a penalty and yet another deduction to manage.
- Deductions – While trade spend represents the majority of deductions, there are a number of other causes as well. Those pesky penalties from your customers, credit memos for RMA’s and memos for invoicing errors are three of the bigger culprits. Be kind to your friendly deductions investigator and give them a single system to work with.
- Reconciliation – Let’s face it, whenever you have two systems, someone needs to reconcile the balances between the two systems. This might be a simple report when that person balances it. Of course, the fun really starts when he or she does not. As long as we’re being kind to our deductions investigators, we might as well be nice to the accounting team as well and limit unnecessary reconciliations.
- Workflow and approvals – Mostly, ERP systems today have decent workflow systems built in. But considering the amount of communication between the investigator and just about every other department in the organization, having TPM and ERP in a single system with a strong workflow engine really streamlines the investigation process.
- Profitability reporting – If you are creating profitability reports in the general ledger (through dimensions) or in sales analysis reports, having all of your accruals, memos, and deductions in a single system is probably the difference between timely and accurate reporting and what you likely have now.
- Month-end close – When I was in the industry, we had to close our books by the third workday. Well, if you wanted to keep your job you had to close by the third workday. Unfortunately, we weren’t dealing with a single system. We had six systems. That basically meant a lot of really late nights on those first couple of days every month. The more you can rationalize your systems, the happier your accountants will be.
That’s seven hidden costs to maintaining separate TPM systems. Doing your homework to determine whether a standalone TPM solution is right for your organization can help you avoid these and other challenges and additional expenses.