Are Unconscious Biases Preventing Your Company from Making the Right Decisions?

November 12, 2014

unconscious biasEvery day people make decisions; some are very simple and therefore unconsciously made, and some involve a lengthy process of evaluating and comparing options before making a choice.  Whether making a simple decision or a complex one, we are not as rational as we tend to believe, and these decisions are often made based on emotions and influenced by our unconscious biases.  These biases influence our everyday actions and are, by nature, unnoticed by us.  They are shaped by our cultural norms and experiences and allow us to quickly filter information to make decisions.  This is where trusting your gut and gut reactions come from – however they can sometimes lead us to make the wrong decisions and misjudge situations. Accepting that your gut feelings may be wrong is very difficult to do, but is necessary to guard against common biases if you want to make the best decisions possible.

These unconscious biases are present in our daily routines but they also represent a significant business risk.    Commonly associated with situations and decisions involving people – such as during the hiring process or when forging new partnerships – they also affect decisions that involve making large investments, like purchasing new accounting ERP software.  These types of decisions are often influenced by emotions and biases – more so than most people tend to realize – and can negatively impact a business if not properly addressed. Examples of these biases are outlined below.

Hyperbolic Discounting

Hyperbolic discounting is the tendency for people to want an immediate pay-off rather than a large gain later on.  This can apply to business owners who would rather spend less money on an easy to implement software solution, than put an investment into a system that takes longer to implement but can provide them with benefits long into the future.  This is why it is so important for companies to begin evaluating sophisticated software solutions while their current system is able to manage their business processes and so the need is not as immediate. Focus should be given to a system that provides a high ROI over a longer period of time, even if the pay-off will not be as immediate.

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How to Determine Ball Park Cost Estimates for ERP Software

November 5, 2014

estimating-erp-costsInvesting in an ERP software system is an important event in your company’s history. Your company is growing and you have decided to eliminate the redundancies of outdated manual processes, to take advantage of the operational efficiencies inherent in ERP software. As you begin your software search, before evaluating different vendors, it is always good practice to establish a ‘ball park’ estimate to ensure that your expectations are aligned appropriately with the vendors that you are meeting with. To determine a rough estimate, you need to establish your software cost to services cost ratio. Have no fear, it is much simpler than it sounds, as many experts agree most firms will adhere to a 1:1 ratio. That is, a company should budget double the price of the software to account for the services needed to install and maintain an ERP system.

The first step involved in calculating a ‘ball park’ estimate is to estimate a software list price for the number of users that you need, then double that number in order to account for the software to services ratio. If the number you arrive at is one that you are uncomfortable with, it may be time to adjust your company’s expectations of an ERP system, or perhaps reconsider if you’re even ready for the investment. However, if this number is something that is reasonable and within consideration, you have passed the first barrier and are ready to answer 6 additional questions to gain a more accurate figure:

  1. How many users will you require?

If the number of users is relatively small (less than 5) you will often pay more for services. This is because many ERP platforms require a minimum number of users, which is often five or more.  Certain vendors may also sell user licenses in packs as opposed to single user licenses.

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ERP Software Sales: trick or treat?

October 30, 2014

ERP-Software-SalesAs we get ready to dish the Halloween candy, I’m seriously contemplating dressing up as the nefarious “ERP Snake-oil Sales” guy. While they’re not as common as they used to be a few years ago, they’re still out there. It sometimes seems like choosing an ERP Software system is a little like trick or treat – some will trick you, and other will treat you well.

 I was reviewing the post on how to select an ERP Vendor, and doing so reminded me of a couple of stories that prospective customers have shared with me recently about the “other” type of ERP salesperson – the “promise them anything to get the sale” type – thankfully a diminishing breed.

In one case, the salesperson answered “yes” to every question about functionality. The prospect was suspicious, so after doing a little research and finding something the software did not do – according to the vendor’s website – he asked the question, and again got a “yes”. TRICK! Happy ending here – he knew he should run away from this sales person as fast as possible.

The other one is not such a happy story. To close a sale (and make quota for the quarter), the salesperson deeply discounted the monthly fees, and got the customer to sign on the dotted line. However, the fine print stated that the monthly fee would increase (by close to 100%) in year 2, and imposed a minimum 3 year commitment. TRICK!

My recommendation is this: an ERP salesperson who tells you what you want to hear, who always answers “yes”, is more likely to be a trick. One who tells you what you need to know, and is willing to answer “no” when necessary – now that’s a TREAT!

 

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POS Functionality & eCommerce Integration for Wholesale Distribution Companies

October 16, 2014

POS and eCommerce ERPAs B2B and B2C eCommerce continues to increase in popularity, the line between wholesale, retail and eCommerce channels has started to blur. Wholesale companies, previously restricted to buying product from the manufacturer, storing in a warehouse and then selling and shipping to retail and distribution companies, are now starting to offer their product through other sales channels and to different consumers. With eCommerce sales expected to reach US $1.5 trillion by the end of this year, it’s no surprise that wholesale companies are interested in a piece of the eCommerce pie. Many wholesale companies have also branched into the retail space, by opening showrooms for their product, exhibiting at trade shows and building actual brick and mortar retail stores.  In order to account for these new sales channels in an all-in-one system, it is important to look for proper inventory and accounting ERP software, with point of sale (“POS”) functionality and eCommerce integration options. This way all data can be stored in a central database, and consequently inventory levels and availability will be accurately reflected no matter which sales channel an order comes in from.

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Understanding the Challenges of Credit Card Processing

October 8, 2014

credit card processing

Guest Post by Robert Hyman of HiTech Merchants

E-commerce and the trend to replace paper checks with electronic payments is quickly driving credit card acceptance to the forefront of B2B commerce.  As such, there are a number of challenges that must be dealt with when your business starts accepting card payments.  Three of them are discussed below.

One challenge is determining the true cost of credit card processing.  Complicated pricing models make it difficult to understand the real cost of accepting card payments. For example, interchange differential pricing charges a qualified rate, a non-qualified rate and an interchange differential fee all on the same transaction.  Calculating costs with this model is understandably difficult and time-consuming.  Interchange plus pricing represents a more transparent pricing model.  Interchange plus pricing charges a simple mark-up above the base cost set by Visa and MasterCard allowing for a common price structure to compare one processor to another.

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4 Popular Features to Look for in Wholesale Inventory Software

October 1, 2014

wholesale inventory software

When your business decides to take the crucial step to invest in wholesale inventory software, it is imperative that you make a thoughtful and well-informed decision that satisfies your business’s specific needs. With an abundance of features and customizable options available, achieving this task can sometimes be overwhelming. Although no two companies are exactly the same, there are several popular features that add value to basic inventory software and allow companies to better manage all business operations. These include; landed cost tracking, barcode scanning, sales rep applications, and lot tracking.

Landed Cost Tracking

Landed cost refers to the total cost of an inventoried product, taking into account expenses incurred to collectively purchase, transport, and import goods. Costs accounted for include such items as border fees, duties, taxes, transport costs and insurance, to name a few. Software that effectively manages landed costs has the ability to automatically account for and reconcile the costs mentioned above in order to arrive at the true cost of the goods. This ultimately enables businesses to protect margins and make better purchasing and pricing decisions.

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4 Tips for Getting the Most Out of Your Inventory and Accounting ERP Software

September 16, 2014

getting-the-most-out-of-erp-softwareERP systems are costly.  They also involve a significant investment of other resources to implement and maintain, including human resources and time.  So when choosing a system, you want to go with a solution that will grow with your company and not require replacement in a couple of years’ time.  Investment in accounting and inventory software does not end after the check is signed, and there are several options for extending the life of your system over many years, long after go-live.   In order to get the most bang for your buck, consider the following:

Sign up for maintenance.

Maintenance is an extra option provided to businesses that can vary from vendor to vendor, but is generally designed to cover the cost of annual software upgrades and keep the application in warranty.  These fees usually amount to a percentage of the cost of software licenses, and can be paid on a monthly or annual basis.  The idea is that since most software vendors are continuously adding new features and improving on the technology of their systems, every year or so they release an upgraded version of the software.  Paying for maintenance means you receive these upgrades whenever they are released, as opposed to having to purchase a newer version outright.  It makes the transition to new technology and features easier if you’re upgrading every year instead of every couple of years. When negotiating maintenance fees with vendors, pay attention to the costs to make sure they also include the cost of the actual implementation and consulting time required to manage the upgrades. If they are not included, these additional fees can exceed the actual maintenance fees themselves.

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