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Take advantage of an alternative solution to conventional accounting and see the whole picture of the profitability of your business distributors
ABC is a costing method that allows us to calculate the real cost and by extension the real profit of each product / commodity taking into account factors such as:
• Size
• Weight
• Recycling
• Method of sale
• Method of distribution
• Method of payment and collection
It is a key strategic tool when your business covers a range of products with very different characteristics. ABC costing moves away from accounting rules in order to create a more accurate picture of how costs are incurred for management decision-making.
First, we gather the total cost of the business broken down into cost categories.
Second, we allocate the total cost to the products and the cooperating industries through "Cost Carriers"
Third, we analyze the results.
We will empower and equip the entrepreneur with the right tools to run their company in a professional manner.
The goal is not to learn sales or warehouse management techniques but to:
Particularly:
Wholesale distributors supply industry products horizontally to small retail outlets (e.g. kiosks, mini markets, grocery stores, etc.) or to vertical markets (e.g. restaurants, hotels, pet shops, etc.). We call this channel “Indirect” as opposed to “Direct”, i.e. the points directly served by the industry.
In its simplest form these merchants buy at some fixed discount on the retail price of the products and this percentage is their profit.
This percentage varies considerably from product to product and ranges from 2.4% (e.g. tobacco) up to 30-40%.
The reason for using indirect channels is economic. Merchants trade in products from multiple industries so they can share costs and reduce costs.
In the economic relationship between industry and commerce, the following questions must be answered:
• Does trade gain from such a partnership and if so how much?
• Can a product with a 2.4% gross margin be more profitable than one with a 24% gross margin?
• Are there industries (in the wholesaler’s range) that finance others?
Vellum has carried out, in collaboration with industries, many corresponding profitability studies, the results of which have helped to understand cost factors and improve the terms of trade industry cooperation.
