Sales order processing costs
We’ve been looking into the cost of sales processing for a while. From the numbers we could find, people talk about the cost of processing an order ranging from $50-$180 per order (in 2014)! Another study found that ‘On average it takes more than a week (51.4hrs) to handle paperwork for a single sales order’. This all sounded a bit on the high side.
Today my colleagues and I sat down, and began working out the math. We have made our own assumptions much more conservative.
First, let’s assume your sales team is more efficient than Google! I’m speaking in euro but the same goes for $/GDP or multiply by your local exchange rate.
Let’s say the time required to process every €500 of orders is one hour. This hour includes:
- Total time for issuing a sales quote/price estimate;
- Order placement, processing and confirmation;
- Order-related costs like phone calls/travel expenses/postage etc;
- And back and forth of information gathering for the order.
This is probably being super-conversative for most businesses, but let’s proceed on this basis.
Furthermore let’s assume the cost per hour for all of the above activities is €25/hour all in on average. In other words, for:
- Every €1 000 of sales, €50 is spent on sales order processing (5%);
- Each time you sell €100 000, you spend €5 000 on order processing;
- And for every €1 000 000, processing orders costs €50 000!
These assumptions will vary, depending on the size of your orders etc, and sales order processing will not cost this much for all companies. But to put it in context, Google earns $1.2m per employee, and Microsoft makes $780K per employee. Furthermore, google spent over €500 000 per employee in 2011.
So, in our assumptions, your sales team is plenty more efficient than the average Googler.
Saving with B2B eCommerce
Now we’re going to show you how to use B2B eCommerce technology to start to make your entire company’s ‘per employee’ revenues closer to that of a tech company.
If you manufacture or distribute products to large buyers only, you possibly have EDI in place. In this case, you may have automated how you process purchase orders and send invoices automatically. If not, contact us on email@example.com and we’ll show you how you can set this up without spending a fortune.
If you sell to independent stores and outlets, you may still be processing most of your sales orders via emails or phone calls, or even with sales reps visiting the stores. As above, let’s assume processing orders from this channel costs you €5,000 for every €100,000 of orders.. if yes, great job!
You decide to use online ordering as a channel for some of your independant stores. Let’s see what that looks like with iStockist for B2B eCommerce!
Your customers are going to love the freedom of placing online orders
You give your independent stores and outlets the ability to order self-service from you. Not only that but they can place orders 24/7, not needing to wait for office hours for the order to be processed.
You are going to save big time on the boring stuff and free up time and resources for the exciting stuff
Furthermore, your orders get integrated with your inventory and finance systems, and all sales orders automatically update stock levels and your invoicing systems.
Let’s consider the savings for manufacturers and distributors who process just €50,000/year of orders online with the iStockist Starter package versus €50 000 of processing orders their usual way.
- Cost of online orders: €600 for €50 000 (1.2%)
- Cost of normal sales order processing: €2500 for €50 000(5%)
- Savings: €1900 on €50 000 of orders. That’s 76% savings
As the volume of orders growing through online orders grows, your savings grow also!