In recent years, the manufacturing sector has borne the brunt of supply-chain disruptions that have led to rising material costs and longer sales cycles. This, together with competition from low-cost entrants, along with a laundry list of other issues, has put unprecedented pressure on industry decision makers. One decision maker who, today, bears the brunt of these stresses is the chief financial officer (CFO).
What is a CFO to do when externalities crowd out all other fires? Do they choose to price more competitively? To cut down response times for proposals? Perhaps. But whatever they choose to do, the time lag between stimulus and response is stretched by the tools finance professionals use for analysis. Spreadsheets, emails, and online documents are out of date. These artefacts of old may be digital in the strictest sense, but compared to up-to-date alternatives, working on a spreadsheet has become tantamount to manual labour.
ERP platforms have long been a CFO’s best friend. As technologies have emerged, ERP systems have onboarded some of the most advanced ones in service of the finance function. CPQ (configure, price, quote), a digitalisation of the sales specialist that streamlines the quotation process, is one such tool. CFOs tend to embrace it because it factors in a range of variables like features, volume discounts, and customisation — factors that a sales professional would normally have to work out manually. Where complexity can lead to error in humans, CPQ is not susceptible. A lengthy task is taken from the plates of salespeople who can dedicate that time to more value-adding activities. And since the quote is delivered quickly, the customer is also happier. Here, in more detail, is how CPQ delivers three key benefits eagerly sought by manufacturing CFOs.
1. Increased revenue and secure cashflow
Being a visual tool, CPQ empowers sales reps, web visitors, distributors, and partners to configure and sell products easily and accurately in a variety of digital environments such as 2D, 3D, or augmented reality. With its powerful in-built automations, it drastically reduces the time spent on labour-intensive tasks, allowing it to directly impact revenue growth and cashflow management, especially since digitalising the quotation process can minimise human errors and the costly misquotes that they cause. In this way, CPQ is a way to make quotes more precise.
CPQ can also be easily integrated with a range of other digital tools such as process-automation and streamlining systems which then positively impacts related areas such as make-to-order (MTO), configure-to-order (CTO), engineer-to-order (ETO), and make-to-stock (MTS). Integrations like these can end up allowing CPQ automation to have a positive influence on operational efficiency across the enterprise, not just in the quotation process. It makes products more appealing to customers because customisation options give buyers control over precise functionality, and yet policies can be set to ensure customers do not stray outside the bounds of manufacturing standards and regulatory restrictions.
2. Enhance forecasting
CFOs are expected to see round corners and over horizons. Forecasting is a part of commercial life, but its accuracy is heavily reliant on timely access to high-quality data. Because of CPQ modules’ integration capabilities, they can merge with ERP systems, giving CFOs the real-time visibility into sales pipelines they need to make informed decisions. With more accurate revenue forecasting, the business can bob and weave with the market, pleasing customers regardless of externalities.
Access to ERP data has further perks. Historical data on quotes, order conversions, and lead times, allows the organisation to refine predictions even further to align them with financial targets. And predictions can subsequently be used to continually ensure accuracy in pricing by introducing new predefined rules and costing structures. This goes on to bolster the reduction in risk of underpricing or overcommitting on capabilities, which is another way of saying “better forecasting”.
3. Ensure compliance
In the Arab Gulf region, regulatory frameworks continue to expand for reasons of privacy, workplace safety, public health, and national security. While maintaining accuracy and bolstering efficiency, CPQ also helps ensure compliance by centralising data and automating the tracking of approvals, pricing rules, and discount structures. Further, its integration with other financial systems makes it easier for all stakeholders to spot risk and to comply with standards such as the GAAP of revenue recognition.
By embedding business rules and regulatory requirements into the CPQ system, organisations can ensure every quote adheres to relevant regulations, be they regarding pricing rules, discount policies, tax calculations, or product configurations. Non-compliance can be a costly affair, so CPQ is again adding business value, this time by preventing audits and fines.
From stress to success
It prevents human error; it gives customers more control over the products they buy; it reduces costs in labour and compliance; it can integrate with other parts of the business to improve their performance; and it can improve forecasting. With these benefits, CPQ solves many of the key challenges manufacturing CFOs face. This makes its the next rational investment for the aspiring regional manufacturer — an investment that, for the CFO, can turn stress into success.
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