May 23, 2022NetSuite , PencilPay Integrations
The new integration changing the way that NetSuite Wholesalers and Manufacturers look at wholesale trade accounts.
Now more than ever, wholesalers and manufacturers need to get the most out of their ERP systems.
Over the last 24 months, the trade that happens between wholesalers/manufacturers and their trade customers has gone through one of the most significant shifts in our lifetimes.
The financial aftershocks stemming from various government policies over the last couple of years can’t be understated and the proof….. look at all the empty retail shops.
Venues and Retailers are still under water and that upward pressure has caused wholesalers and manufacturers to wait long periods of time for payment and absorb huge cashflow pressure.
There are a bunch of forces that have led us down this path, so here are 4 of the most damaging:
1. The Commercial Leasing Moratorium
The deferral of rents during the pandemic has placed Venues and Retailers in a position where they are expected to pay the deferred rent, as well as their standard rent. The outcome is that rent & utilities are paid first, then staff, then suppliers.
2. Job keeper subsidies & student VISA holders
The mass exodus of working holiday and student VISA holders caused a massive shortage of labour in final mile transport and the service industry.
Couple this with huge unemployment benefits to the job seekers and you have a labour shortage in small and medium businesses that can’t afford to compete for staff with major corporations.
3. Supply chain disaster
In an effort to reduce smog prior to the 2021 Winter Olympics, the Chinese leadership slowed production in 64 Chinese cities, many responsible for locally manufactured products due to be exported to Australia.
This started the slowdown. However once production kicked back into gear, we saw vaccine mandates become legislation, which excluded many Australians from work and crippled the part of the supply chain charged with receiving, then distributing the goods.
4. Inflation
Add billions of dollars in government stimulus and what was an over-performing stock market and you have all the ingredients for what we are experiencing now… Massive inflation.
Too many dollars chasing too few goods.
The Net Effect
Supply chain slowdowns, massive inflation, labour shortages and venues and retailers that don’t prioritise paying their suppliers on time is a great way for business relationships to fracture and die.
The other shift is that wholesalers are busing more using tech but not always applying it in the right areas.
We know that the way you start new wholesale customer relationships and maintain your existing ones sets the scene for your cashflow and the problem is really an obvious one.
Think about the last time you applied for a personal loan. The lender did ID checks, a risk assessment, they got security or a guarantee and your bank account to debit repayment from.
The credit application process for B2B Trade Customers
Then look at B2B product manufacturers and wholesalers. They sell around 80% of their inventory to customers on payment terms or trade credit.
The minimum requirement is usually a paper-based credit application, so we send an email with a PDF attached or a BDM drops it off for the customer to fill in.
– The customer then needs to print it off, fill it in.
– It’s 8-pages, 100 fields long and the same information every time; and
– A lack of suitable technology makes it tough to collect a billing method.
– Then I scan it in and send it back.
The Credit Application Process for Accounts staff
That process sucks. Then we switch to the other side, when a supplier receives it.
The 1st thing they notice is the handwriting is often illegible and the paper-based nature of the forms has a predictable outcome; wholesale customers rarely fill in the fields required….which means incorrect or missing ABN’s, no ID and no director verification.
The accounts person at the other end should be manually verify the company info, but this is rarely done. Finally, they enter the data into multiple systems to set the customer up for ordering, deliveries, and invoicing.
This can takes days or even weeks to complete and is a bad customer and supplier experience, which causes delays in customers placing their first order. Sales hate it, Customers hate it, accounts hate it and then when the buyer doesn’t pay, business owners hate it.
There is a reason why banks get paid back 99.95% of the time and suppliers get paid late 53% of the time. Theres a bunch of payment businesses out there but they’re not attacking the problem which is that Small and medium product wholesalers are funding and administering trade credit with little to no expertise in running a credit business.
How to safeguard against falling into this trap
So we decided to create a toolkit that was fully integrated with NetSuite to manage the ID, contractual, risk, security & repayment workflows needed to manage hundred or thousands of trade credit customers.
This has been developed to insulate wholesalers and manufacturers against these outside forces and control what is controllable.