Enhance Profitability by Using Overhead and Load Features
The purpose of an overhead or a load is to add profit that cannot be given away by our salespeople. These become profit that will be additional to the margin achieved by the salesperson.
There are a number of ways to add a load to products and services in RFMS. We will consider two in this article.
Overhead
You can apply an overhead as a percentage of the cost of products, or labour, or both. This is a setting found in Order Entry/Utilities/Admin System Options. In the System Options screen, search on “overhead”. Double click on Standard Overhead Margin Set-up. Once again, double click on the line in the new window, and you will see you have three options; apply the overhead (or load) to Material, Labour, or both. The load you apply will increase cost to your salespeople, and will effectively be additional profit on top of that which they achieve in the sale.
As an example, with an overhead set at 1%, a carpet that costs $100.00 per metre will be seen by the salesperson as having a cost of $101.00.
We recommend you start low, maybe 1%, and then over time gradually increase it. I think 3-5% is probably as much as you might go before it begins to affect the competitiveness of your salespeople; you want them to achieve their normal margin; it would undo the exercise if they were to reduce their margin to remain competitive.
To give you an idea, a 2% load on an annual revenue of $3m would create additional profitability of around $40k annually.
Product and Inventory
If you have purchased stock at an advantageous price, the risk is that your salespeople achieve their normal margin, and the net result to you as the business owner might be very little in the way of additional profit. Carrying stock carries expense; you want to achieve better margin on stock than you would on a cut length sale. RFMS allows you to add a load to stock, increasing the cost the salesperson sees when they process the quote. Again this is additional profit for the business, recognising the cost of carrying stock, and ensuring that your customer is not the sole benefactor of your purchasing power.
Similarly, if a supplier gives you a price advantage on a product, you don’t want all of the benefit to be enjoyed by the customer. You can add a load to the product to ensure this is not the case.
If you would like further information on overhead and loads, don’t hesitate to contact us, and we will be happy to help.