Before examining the key financial operating metrics using new technology, operators should keep in mind that investing in the future is easier when the operator has an overall game plan. Vending operators need to invest not only capital, but also time in educating themselves about their rapidly changing industry.
A business plan covers the use of all company resources, and lists quantitative goals (i.e., increase sales by 5 percent) and qualitative goals (i.e., improve employee) morale. This article will address the financial measurements a company needs to track in order to pursue its quantitative goals.
Starting point: Profit and loss statement
Most companies have a profit and loss (P&L) statement that includes gross sales for a finite period of time, and various costs that are subtracted to produce the net profit. This P&L statement provides a starting point for measuring operating efficiency.
Most operators' P&L statements include sales, refunds, taxes, commissions, cost of goods, equipment depreciation, spoilage, service and overhead.
As a company invests in tools that improve efficiencies and/or sales, the net profit improves with time.
Improved information management tools, such as state-of-the-art software, offer a higher degree of accuracy and more timely information. Software that allows an operator to analyze an account's profitability on a regular basis is essential.
The more robust the software, the more organized the company, assuming the company utilizes this organizational tool.
In a business that is as capital intensive as vending, organization impacts efficiency, in turn affecting profitability.
Operators who implement software and use it usually have access to a lot more comprehensive and accurate data than they had before. Many find they have more unprofitable accounts than they realized, and thus reduce their customer base, which makes them more profitable.
Conventional wisdom versus reality
Conventional wisdom holds that a vending company doesn't invest in management software until it at least reaches three routes. This is one piece of conventional wisdom that gets thrown out in today's operating environment.
The sooner a company invests in management software, the more easily the company will be able to make big upfront investments (i.e., new equipment, new employees, new warehouse) and monitor its return on the investment. Delaying the purchase of software increases the time it will take to input historic data, teach staff new procedures and make use of efficiency enhancing management reports.
Software's ability to track financial operating ratios is an important reason to have it. There are other reasons as well.
The use of paperless systems that reduce and eliminate hard paper copies has a number of benefits. Information that is scanned into systems eliminates numerical transposition errors. Electronic mathematic calculations are error-free. Electronic filing of data is more space efficient, easier to use and more secure than filing cabinets. Electronic reporting and analysis improves human productivity.
As operating costs increase, companies find they need more capital. Whether the need is to add staff, equipment, software, or to acquire another operation, a vending business needs capital. The financial information that software provides about a business enhances the company's ability to secure financing from lenders.
Quality of data affects market value
Accurate, comprehensive financial data also allows a company to know its capitalization value. This is important to any business owner who hopes to some day sell the business, or unexpectedly finds himself in a situation where he needs to sell quickly.
Having accurate financial information allows a company to invest in its future. Investment adds to a company's market value. Recent vending company purchases have ranged from 5 to 45 cents on annual sales dollars, largely due to different levels of reinvestment.
Many vending operators already use some type of inventory management software to monitor the profitability of machines, locations and routes. Operators use this information to calculate the company's profitability.
One of the big advantages of newer software is that it also enables operators to more quickly identify changes to some operational aspect to improve the profitability of a machine, location, route or the company as a whole.