Podcast transcript
Introduction
Hi, and welcome to another live episode of Marketplace Masters. Marketplace Masters and this series in particular is focused on going deeper into the challenges that Amazon vendors faced to lift performance via really practical actions and insights.
Paul Sonneveld
I'm your host, Paul Sonneveld, and today we're going to continue our journey to learn how to build the best-in-class cross-functional team for your Amazon vendor channel. To help us do this, I have re-invited Bruno Ferreira, back on this podcast to really join us and share his expertise.
Bruno, as some of you know, is the founder of Blue Dot eCommerce, a full-service expert partner for Amazon Vendor Central in-house integrated operations across their entire supply chain. From sales to logistics and finance. Bruno spent the past seven years specializing in setting up and managing B2B Amazon Vendor Central operations for many EU-based manufacturers, distributors, companies, and brands for their Amazon global businesses across the EU, Middle East, India, APAC, Latin America, and the USA. So, he brings with him an enormous amount of experience to the conversation today. So let me just say, Bruno, thank you again for agreeing to come on the show. Really look forward to the conversation today.
Bruno Ferreira
Thanks, Paul and it’s great to be here again. This will be the first of the series in that we decided to bring more people on board about Vendor Central where finishing not the last part, but finance today. So let's cover that.
Paul Sonneveld
Yeah, you make a really good point. This is actually for those of you that weren't part of our prior sessions. This is actually session three in a series of, three, surprise, surprise. We first covered sales, then operations, and today, finance, right? At the end of the day, that's where it matters. We need to make sure that Amazon vendor is a profitable channel and, how to do that without finance. I'm not sure. So, Bruno, why don't we start off, maybe if you can just set the scene for us in terms of how does finance fit into the broader cross-functional team and the setup when it comes to Amazon Vendor?
Bruno Ferreira
Well, it's a very important part, Paul for the cross-functional team. We know of course, that when you are selling, sorry, I'm just having some difficulties here with the presentation. So when we set up the financial department within the accounting, sorry, Paul, can I just, I just lost my presentation. We were just both laughing because we moved. Our operational system.
*(Both laughs)*
Paul Sonneveld
So we, I can remove, I can see it. Let me just remove it and then I'll add it again. See if that helps.
Bruno Ferreira
Yeah. Because for me it's just, I am not able to see it. Okay. Now I think I just need to share again. Sorry about this guys.
Paul Sonneveld
No problem. We're just saying before that both Bruno and I have switched back from the world of Windows to Mac. And we've been told by everyone around us it's the right thing to do. But right now, it's a little bit blind leading the blind.
Bruno Ferreira
Yeah, all, it's all good. We have this funny moment.
Paul Sonneveld
Here we go. Can you see that? I can see this, Bruno. Can you see that?
Bruno Ferreira
Yeah, cool. So sorry about this. So, as I was saying, as we know, the cross-functional team will be managing the day-to-day of Amazon Vendor Central. Of course, you guys know my vision on this. It's kind of a maze. This is the feeling I get from my clients. And when they start or even some clients I have that are already supplying Vendor Central for a few years now, they struggle to even understand how exactly it works. That's part of what we do. We train the cross-functional teams.
Finance is very important. Just think that I say this almost as a funny part. This is not a charity. Amazon is not a charity. We have the amazing work preparing all the POs, taking care of all the dispatch, and when it gets delivered, of course, it's time to invoice it. And Amazon has a very transparent way of the invoicing and payment system.
But as usual, it has some details that people need to be aware just to prevent even risks in their financial situation, controlling their cash flow and preparing for some surprises that might come from the payment system. I'm talking about deductions from short claims and chargebacks and all of those details that we know might happen.
Of course, the role and responsibility, within the cross-functional team for this will under the accounting team. Sometimes I advise people, it doesn't need to be the head of the account team. It doesn't need to be the CFO. Of course, that role will always fall under one of those two people. There are sometimes decisions that need to be made, strong decisions. Sometimes I'll give a couple of examples ahead. And of course, a CFO or the head of accounting is the person that we need to go. To ask for those authorizations and make strong decisions.
Paul Sonneveld
And Bruno, how does that the finance team or the finance business partners, excuse me, how do they fit in with between with the sales and the operations team? Not so much even talking about process, we'll get onto that, but more in terms of team structure and what's a very common setup that you tend to come across, in your troubles?
Bruno Ferreira
Well, for the finance team, it's very important once again, a strong communication line. They think about the finance role as the person that will always be depending from the head of logistics or the person from logistics, and also the main point of contact from sales.
I'll give you an example recently with the client for it was caused from the Amazon side. We should have noticed from our side, the team was still a bit inexperience and an error occurred. What was the error? We were receiving POs from Amazon UK in Euros, and we actually processed those POs in GBP.
You can imagine already how that was a pain for some time and it was a long process to sort because we had to get the support of the vendor manager to change the account currency to Euros. We have internally to do credit memos on all the GBP invoices, re-invoice everything in euros. Again, upload those invoices in the system. So it's very important that the role of the finance person within the cross-functional team it's always communicating. That role immediately noticed that the system was not allowing to upload the invoices.
So what happened immediately communicated with the salesperson, and the salesperson noticed, oh, okay, there might be an error here in the currency. I got on board too, to advise. It was an issue that with their experience I needed to support and we sorted it, but immediately for them. And it was really good to see how they. Because they were starting their journey. They were five months in.
All they understood that the communication was so important. How, until that point, probably how the finance person was someone within the cross-functional team that had not as much visibility in the day-to-day as logistics and sales because they were permanently in communication, processing deals, mismatching the quantities, but then, that day, the finance rule stepped in and said, there's something here.
There's an issue here. I need your support. And it was very important because we have established a strong SOP for communication, and it was really cool to see the team acting as a team coming all together to sort the issue. So, it's very important in the finance and also in a funny side of it, you can sell, you can deliver. Guys, I'm here to take care of the payment because in the end of the day, that's why we're here.
Paul Sonneveld
That's right. Well, you are already hinting at the fact that, when it comes to finance processes and invoicing and all of that, it's not smooth sailing most of the time or cannot be, at times. Which really gets us into, okay, let's try and understand, at least paint a picture of payments, remittances, some of those finance flows that happen between the vendor and Amazon and vice versa. Can you take us through some of it?
Bruno Ferreira
Yeah, okay. But very quick just for us to review. So we know a bit more now, I hope people are carrying with us and watching this amazing podcast that we've been doing. So if you remember, we start with the sales, the PO processing, but then logistics steps in and then finally finance, but not last. Because it's very important.
So, and what's the first role from the finance team within the cross-functional? They start uploading the invoices. It can be done manually or automatically. It depends on the size of your business. It's actually an internal decision from my side. I always advise people to go through an EDI system if it starts to grow. If you have 60, 80 POs a day, you can understand how mental can be to upload manually, and of course, when you are doing through EDI, it'll allow you also to prevent some type of errors that manually, you need to pay a bit of attention.
I'm talking about you need to input manually the invoice number. I've seen some errors recently. One of my clients there was an issue with a couple of POs that were still not being paid, and we couldn't see them. They were created in the internal ERP, but they were not showing on Amazon and I stepped in to help and what was happening is that the person that uploaded manually the invoices, instead of giving the invoice number in the field on the Vendor Central in the web interface, they actually paste the PO number. So when we were running the reports, there was no much between that invoice number, that was actually the PO number, and our internal ERP. So, it needs to be very well considered when you step in manually or make the decision, and I advise people to go to EDI. There's amazing partners that you can have to help you with your journey.
Paul Sonneveld
So, is there a cutoff in terms of orders, monthly orders that you'd say you really have to move to EDI now?
Bruno Ferreira
It depends on the size of the business Paul, and when I say the size of the business, I'm not talking about turnover, it's the amount of POs that you are receiving daily or weekly. I've seen my own experience five years ago, I was uploading manually around 180 invoices a week until I convinced the business to invest in an EDI solution. And everything changed from that day because at that time, I was receiving the communication from the role Finance from my accounting team receiving emails weekly.
Oh, this is not matching. Can you help? And it was an error because I was doing copy paste on the invoice number and something happened, and I gave a space or I removed the number. So ED I allows you to do that. It's an internal decision Paul. I advise if you are receiving, I don’t know, 10, 15 POs that you need to process, I would advise to consider strongly the EDI solution. It makes life very easier.
Paul Sonneveld
Yeah, no, for sure. Well, also, it's not just volume, but it's also human error, like, the example you gave before.
Bruno Ferreira
Yeah.
Paul Sonneveld
Absolutely.
Bruno Ferreira
For me, it's more the human error that can be caused by manual interaction. I am full supporting for automation in everything that we can. And Amazon, when the central has some amazing reportings and it allows you even to access through the API. So there's a lot of things that can help you manage the day-to-day if you can automatize it. And that's part of what I do with my clients too.
Paul Sonneveld
Yeah, so we, well, I think we'll talk about some of those tools, a little bit later, but I want to go a little bit deeper on some of those finance flows, adjustments, others. Let's say you're part of the finance team and you're just told that, hey, for the next 12 months you're going to be looking after the Amazon vendor channel. What will be the crash course around all the different transaction types and things that can happen in terms of your financial flows? Maybe just the main ones. We don't have that much time.
Bruno Ferreira
Yeah. Well, Then I'll step in just to give a brief insight of what's the Amazon payment system. So, as you know, Amazon sometimes doesn't make it easy. My opinion is that it's fair, it's transparent, as long as you know, the requirements and you are properly trained. So Amazon payments can be a bit of a maze. If you think about this example Paul, you have other clients and the supply chain for those clients is you receive an order, you process the order, you dispatch, you sent an invoice, the client will pay according to their payment terms. What we know is that Amazon is a very good payer.
They will always pay on time. No issues there. Other clients might not, you need to chase, but what you need to think about Amazon is a very key difference as other clients of the company is that when Amazon, so after all of that work, from the sales, from the logistics, it gets to you, you upload the invoice and that you're actually sending the invoice for payment. But Amazon on the side, Amazon doesn't start considering your invoices for payment. The first thing they do, they consider for the deductions, and they will see the deductions as the first part of the payment process. And what are those deductions? Those deductions can be, we’ll start with the Co-Op agreement.
Amazon will deduct from the payment, the Co-Op agreement every month. So every 30 days they will deduct. Just think about that. If a new vendor for Amazon has payment terms of 90 days and Amazon is deducting the payments from the Co-Op agreements, the damage allow and MDFs, whatever you agreed with Amazon, they'll be piling for 90 days for three months until you start receiving.
So I've had some clients that were really surprised that were waiting and it was a strong financial effort for them. To wait for those 90 days so that you can start having the floods of cash coming in because for 90 days you kept sending and nothing will return. But then when they were waiting for those payments, they see the payments in the system, but there's no cash in the bank.
And then they go to the remittances and they see, oh, well they actually paid, but they deducted all of this. And in the end, I still owe money to them. So what happened? Well, that was those 30 days of those Co-Op deductions because you will only get paid 90 days later. There was nothing to deduct so Amazon could not deduct it. So this is one of the points that companies that start through vendor need to be aware of. They will also deduct a few things that we are now very well aware of. Chargebacks, Shortage Claims, everything will get deducted.
And think that on a shortage claim, let's get the example. Like you will receive a shortage claim. Shortage claims are issued in a day. The system will run a 14-day, trying to find the stock if it does need to issue the shortage claim notice. But think that that shortage claim notice will immediately be deducted. If you have a payment the following week, that shortage claim will be rev deducted from that. And then my clients sometimes are like, well, they didn't even give us time to dispute. You can dispute if you win a shortage claim that cash will be reversed don't worry in the next month.
And one point I always mentioned to companies, and they are always, I received a lot of phone calls every time this happens. The finance role calls me or sends me a text. Bruno, I'm seeing something on the remittances. It's a provision. What is this? What's a provision? So Amazon, when they start with vendors, and this happens mostly in the first 12 months when they start doing business, Amazon doesn't actually know you.
You have a long-term partnership but, they can see that it's still not safe. So they make some provisions monthly with some cash that they were supposed to pay you, but they retain it on their side, they put it on hold, they deduct it, and the next month it'll be reversed. It's an automatic system.
And this is an important point too, Paul because if you don't know all of these details about the payment system of Amazon, you can feel a bit lost sometimes. And you will see in your bank account, in your statements, you'll see that actually Amazon paid this, but you are expecting a payment of an invoice of 1000 euros, but you only receive 100 euros in the bank account. Where to go, where to go to check what happened, what did they deduct? And is it correct?
Because you always should be making monthly, quarterly audits to your own work. The finance team internally should do that because you should not, and you know two of my favorite words, visibility and traceability. Let's not lose trace of it. Okay. So this is just part of some of the deductions and it's is actually how Amazon starts the payment process. And only after that then they will issue the payment. And when they issue the payments, what they will be paying, of course, they'll be paying your invoices, they'll be paying those provisions they made the last month. If you disputed some shortage claims or chargebacks, they will do the reversals and that will show in the payment, in the remittance payment menu.
Paul Sonneveld
Sounds like the first few months as a new vendor can be very rocky.
Bruno Ferreira
Yeah.
Paul Sonneveld
And you need to hold your nerve and probably your temper and probably invest in understanding really what's going on because you, as you say, a lot of those funds will come back, but knowing exactly when to expect it. And so you can model it out and you can sort of compare it to what you're actually expecting, what's realistic, I think is absolutely key. Certainly. You know, you've got this perfect storm of not knowing the platform and a whole lot of things going on because Amazon doesn't know you, you know, particularly the,
Bruno Ferreira
Yeah.
Paul Sonneveld
The provision that they're taking. I'm assuming by the way that that is related to, in case they're seeing a disproportionately high number of returns or things like that. Yeah. Want to hedge their financial risk against that.
Bruno Ferreira
Yeah. So basically think Paul, that sometimes it's even a new product, a new brand, and that's a very good example. What if it goes terribly wrong? I've never seen it happen, but this is just a safety measure from the Amazon site. But in the worst-case scenario, what? What if something goes really wrong? And even Amazon has to recall products. So Amazon is just saying, I'm keeping part of this money if I need to have extra costs. Cost by your business to mine.
So very quick. This is one of the main reasons for that. I'm just thinking about the point here, Paul, that I think it's important to mention now about the role and responsibility of the finance contact. If you remember, and I hope some people in the podcast remember. I consider we have two types, well, there's more, but two important types of disputes that we can have are chargebacks on shortage claims.
And if you remember I mentioned that chargebacks should be disputed by the sales contact. Shortage claims, I believe and I always train the teams of my client to be done by the finance role because the way I see it, shortage claims will fall in their responsibility because they will notice the deductions on the payment and they will have access with that through that open line of communication with logistics and sales to get the requirement documents to open a dispute on a shortage claim.
I also believe it should fall under finance to dispute the shortage claims because it's a financial movement. If you think about that, chargeback is more of an operational, of course, shortage claims. I always advise, let's check internally our SOPs, but from my experience, Shortage claims will always happen. We know how Amazon works how it can be a bit confusing sometimes within the fulfillment centers, but I strongly believe that shortage claim dispute should be opened by the finance role.
Paul Sonneveld
Yeah, that's clear. So finance role, let's just go back there. As you onboarding a new finance person, I'm assuming you've been in this situation a lot where you're training them. What are the tools inside Vendor Central that you point them to and that you spend time training them on? What are the most important reports from a finance perspective inside that portal?
Bruno Ferreira
Yeah. So, well for me, the skills for someone to succeed managing from the finance team.
Very quickly, strong knowledge of Excel. Some data formulas will help a lot. But the Vendor Central web interface already provides a few very, very useful tools. I consider these three that are the most important. They will help a lot, and this is where I mostly train a new contact from the cross-functional team for finance.
Remittance. So remittance is the place in Amazon Vendor Central where you will have visibility of the total of the payment. And as we discover, you will also see in a very detailed way, the payment, the invoice number, what are they deducting? If it's a Co-Op agreement, you'll see the number of the agreement, and if you have doubts, you can go to the menu to check if it's correct.
I always work with the finance team of my clients to do audits quarterly to calculate themselves the deductions for damage allowance and all of those points. The remittance, it can be very useful if you understand a few details. I'll give an example. Think about that you upload your invoice and Amazon wants to know your invoice number, and Amazon actually made it a bit easier on that side.
They will create a lot of documents. Remember that for each shortage claim, each chargeback, there will be a document allocated to that. It'll be a debit note. It'll be an invoice. The Amazon system creates the number of those documents based on our invoice number. So, in the case of a shortage claim, they will grab your invoice number that you already uploaded and there's, you dispatched and you delivered 10 items, but the system identified that you only delivered eight.
There's a shortage claim of two units, so they will create a document that will have your invoice number and the letters SC in the end. And then if you dispute it and you succeed to dispute, and Amazon recognizes, okay, we found the stock and it's here, they will create a new document. So they created a debit note, then they'll create a credit note and it'll have SCR in the end of your invoice number, and it's a Shortage Claim Reversal.
So I see this system very useful because you can just export a report to Excel. And very quick, in the next column, just remove the letters and you'll have a list of the invoice numbers that can match with your internal ERP. And you know what the issues can be caused by this. So it's a shortage claim. I need the proof of delivery. I need the PDF copy of the invoice, and you'll see all of that in the remittance. I only give the example here for shortage claims, but chargebacks will have a specific code tool. It's not actually with your invoice number. In the case of shortage claims, because they have a specific code, but I train my teams because Amazon is consistent in the way that they create the numbers of the documents that the system generates.
Another very important and useful tool is the financial dashboard. The financial dashboard is a summary of your business with Amazon. Very quick, that's what it is and if you know how to read it, how to interact with it can be very useful. You'll check, what's owed to you, what Amazon is going to pay you, when they are going to pay you. You will see what's open for payments, errors that might happen, like what's causing some blocks in my payments. I keep waiting for these two invoices to be paid. It's 95 days. My payment terms are 90 days, and I still haven't received it.
Well, the financial dashboard is the best place for you to come and check all of that. And they will give you a very transparent way to access that data. Is it simple? It's not. But with the proper training and if you know how the system works and what you are looking for, because sometimes it's very important not just to know where to go and look for, but what you're looking for and those numbers that the system creates. If you know those details, it's very important.
And then the Financial scorecard. Financial scorecard. I always tell my teams that I train from finance that it's the best tool for us to catch up in anything that we left behind. We shouldn't lose trace. We should always have traceability of everything we do on Amazon, on each of the three sides, sales, logistics, and finance.
But in finance, you can feel lost very quick. If you start, Open disputes. If you don't organize yourself internally, if you are doing manual uploads of invoices, you can lose trace of a few details very quick. The scorecard will help you with that. The scorecard will even tell you, sorry, we received these bills and you still didn't invoice it.
So Amazon will tell us that through the financial scorecard, there is a specific menu there, and you can go and you'll have the PO numbers that you delivered. And you still did an invoice. I'll give you an example. Recently with a client, I was doing a quarter audit with the finance team and I noticed that the POs that Amazon was saying were still not uploaded. They were actually uploaded. So for us it was a bit tricky. So what happened here and what we noticed is that without no one informing us the system, the ERP system, this is a good example how sometimes when we export data from both Amazon Vendor Central or our internal ERP, it's important. Check your data, clean it first, understand it.
With time, You'll be working always with the same files and it'll get easier. So what was happening there was hat person that was doing the mismatching from Vendor Central to the ERP was not getting a match because for some reason the ERP started to have a blank space after the invoice number.
And as we know, a blank space is still a character for a system, so was not bringing a match. But I found that out, but immediately I couldn't. And I was also surprised. Okay, what's happening? I can see it here, but it's not showing here. So it was, once again, it was very important that communication line that we had with everybody within the team.
And I'm also really pleased and happy when I see the teams coming together and working together. So it was just a blank space that was causing that. Nothing else. Everything was correct. Amazon was saying we didn't upload them, but we actually did. We opened a case in the support ID. Amazon acknowledged it, everything was okay.
Paul Sonneveld
It's amazing. The devil's in the detail, isn't it? That's my second favourite. After, leading zeros on their SKU numbers. That's also, this is a great joy.
Bruno Ferreira
My favourite.
Paul Sonneveld
Yeah. Wow. That's, lots of war stories there. Right. We're, we've still got a little bit to cover it. I'm looking at the clock here and we've gone well over half an hour already, so I do want to just get to some of the other nuts and bolts around managing the financial risks and mitigating some of those risks in particular. I mean, because when things go wrong, they can go wrong by quite a large magnitude. How do you work with clients and what steps you put in place or how do you advise them to manage some of those risks?
Bruno Ferreira
It's very important, Paul, as I mentioned if you're working with Amazon with the 90 days payment terms, it can be tough because you keep sending stock, and invoicing, but you're not actually getting the flags of money coming in. For me, I see it through my experience all over the years managing, a very detailed Amazon-oriented P&L will help a lot with that task. I created my own way of seeing a P&L and how it, I have a lot of success stories, how it helped to, to actually give the visibility to make some strong decisions.
What do I consider for an Amazon dedicated P&L? It happens a lot, Paul. I get a new client. One of the first things I do is a total audit on the business. If they're a new client, it's just the setting up. But if they're working with Amazon for a year to year, I start with a very deep, to get a lot of insights through a total audit to their business. And when I ask them, can I see your P&L for Amazon, usually what happens, they bring in a P&L that was basically just. It was the company P&L and the salesperson that was managing Amazon just adopted, or not even adopted, just completed the fields of that P&L and was working with that.
What that calls Paul, is the risk of not giving you the total visibility. I try to do some print screens to show a few of the details of a very, very high-level detailed P&L that I always build for my clients. And as you can see, I consider everything. I want to know my peak and pay costs. I want to know my shipping costs. How much is it costing me a box, but also how much is it costing me to pack within my internal team? That box to dispatch. If you are working with a third-party logistic partner, it gets a bit easier because they actually will invoice you. The handling and packing. But if it's an internal team, it get but it can be done, and I've done it.
Basically, I just spent two, three days with the teams in the warehouse. You know how I love the logistics teams and warehouse teams. I spent some time with them, and I actually managed to calculate a percentage of how much you just cost in. From there, as you can see, I want to know every single detail. My distributions are very important. Cost of goods, I want to know my net selling price. What's the net selling price? From my experience, companies sometimes consider the best example of a few years I met a client, a company that didn't realize that Amazon will deduct the Co-Op agreements from the price they were selling to Amazon.
You thought that you'll receive an invoice. Every month for those accruals. So actually, what he did was he was selling a product for 10 euros, but then once he deducted it, he was actually selling them for 7.20 and he couldn't sell it for 7.20. So there was a huge on hold on that account immediately. And the strong conversation with the vendor manager at the time, with this type of P&L, it can just insert, it can be full automatized for API calls and reading also data from your ERP.
I'll give you an example. You know that in the last two years, we've been seeing a lot of fluctuations in the transport costs. Carriers sometimes have changes daily. Recently, I was called to a meeting where the logistics team was like, look, I just received an email from our partner, and this is increasing this percentage. How will this impact our business? Once again, and I won't get tired to say it, think about how communication is so important.
The team all works together. Immediately, the logistic contact was like, guys, we need to speak. I just received this email from our carrier partner. We went into a meeting, the sales contact shared the P&L the logistic contact said, okay, so that value there actually changed it to this. And when you change that value, dynamically, all the P&L changed. And we made the decision to reject those POs and put on hold until we can have a conversation with our vendor manager. The vendor manager was amazing. He totally understood what was happening because everybody was going through that and he allowed us to do some minor cross price increase in the product just for us not to get so much impact from that fluctuation in the carriers.
You can also see that I give a lot of importance. You see on column, you see their accrual number one. I work always with my finance and I always say, look, let's get a PO here. Let's get here an accrual that the system will do automatically from each invoice to Amazon and put it to the side. Why? Everybody knows that he's been doing this for a couple of years.
Well, shortage claims, yes, you can dispute them. Will you win them? I have a high success rate on shortage claims and chargeback disputes. But let's face it, some of them we won't win. That money can help with those surprises because we know that sometimes shortage claims can be a huge impact negative impact on your net profitability. Because and I say this to my clients, remember that you sent 10 unit, they say they only received eight. They will only pay eight. Those two units, actually you are losing the cost you sent them to Amazon. Your true cost to make that money again, you need to make a net profit of 15 units like those just to cover that hole.
So let's put some money to the side. We can do some accruals internally to help with those. And as you can see, when I can see there also to have visibility on our gross sales value. How much am I paying for the Co-Op? I call those retros because they'll be deducted from in a retro way from the past invoices. I want them to have all of that visibility.
I want to know my GSV less the retros because it's basically the net cost I sold to Amazon. I want to have visibility on cost that are impacting the business and then that will bring us to our margin contribution. And that's where I see always people getting happier to know how much am I making in it product? How much actually am I making on this? So I know that I deduct all of this, but I want to know unit, how much, and people really know how to get that value through a P&L, a dedicated P&L like this.
The highlighted column Paul. It's just so it's coming from that accrual. So that accrual, I'm considering 0.6% and you can see, adding. So you just think that with an accrual of 0.6%, if you have a medium-sized business with Amazon, you'll get around 2000 euros a month. And if you think that you have that PO there for any surprise, and I always tell my clients, you know what, in the end of the year, just speak with your CFO and if you guys worked hard and there's no issues, that PO can go for a party and invite me. to money.
*(Both laughs)*
Bruno Ferreira
Because that money is there, there was no Christmas party. Yeah. So this is very important Paul. To keep because there's a lot of financial risks with supplying Amazon Vendor Central. We mentioned that the first 90 or 60 days are a pain. You need a strong quick cash flow and you need to be able to understand why and you need to forecast it.
I help my clients when I do projects of initial setup, where I set up everything for them, bank details, everything. I always start with this P&L with the forecast, how many units, and then there's all of that work. What category? What's the return rate like? What are we doing here? And we start with that. And then when they say, okay, but I'm only getting paid in 60 days, can I do it? They will see everything in a P&L as detailed as this. It's very important.
I gave the example, the cost carrier variances. You don't want to be caught and, oh, shall I supply? I don't know. Well, you will have total visibility with a P&L like this, even your cost of goods, Paul, think about that. Depending on the category, you might be working with constant changes of cost of goods. That happens a lot with the grocery vendors. I worked last year, with a company within grocery. And the energy bill, everything went through the roof.
And once again, we had to make the decision, okay, we're not a charity, right? Amazon expect us to make some money too, and we want to help Amazon to make money. So once again, we, through that dedicated P&L, we total visibility in less than one hour, the senior managing team sited in a meeting made the decision, okay, let's stop this. Bruno, can you please contact the vendor manager and initiate conversations? What's going on? And at the time, and sometimes Amazon can really listen to you and be there to help. Sometimes not. We know that, especially these days, but I think that this kind of P&L will give you the visibility to make those strong decisions.
Paul Sonneveld
Yeah, fantastic. I love that detail. Thank you, by the way, for just sharing those practical tips as well. Yeah, there's like pragmatic insights and tips and then there's Bruno's tips, which are going to you know, really build on decades worth of experience in this space. Really tips on the trade, I'd say. So. Thank you so much for that. That's really fantastic. We are well over time, Bruno. Probably no surprise to any of us who know both of us.
I always go over time and when Bruno's on, I really go over time. That's all right. That's been super useful. I thought maybe just a finish up, what's kind of one or two pieces of advice you would leave with particularly kind of newer vendors, you know, vendors that are just starting to supply to Amazon. They're starting to set up their SOPs and their processes. When it comes to finance, what are maybe one or two pieces of advice you'd leave them with before we close out?
Bruno Ferreira
Well, the first advice Paul will be manage the risk on your cash flow. If you don't have a strong cash flow, but you really want to start working with Vendor Central, remember that you'll get your money 60, 90 days later. So if you need external influx of cash to support those two, three months of business, consider the cost of a loan. Even if you have to consider to include those costs in the cost that you’re selling to Amazon. And if you think about that, that will have to be done at the time that the sales contact is uploading the costs to the catalogue.
So once again, communication, very important. Everybody needs to come together. So if you are starting, you are a small brand with big ambitions, you got invited, you want to supply, but your cash flow is not prepared. If you go to Pan EU with nine countries. Think about the costs of getting external flux of cash.
The second advice is to invest in a good finance person. As I said in the beginning, it doesn't need to be the head of accounting, the CFO, they don't have sometimes the time required for the task, the day-to-day management. But if you are going to hire, hire someone, not specifically with experience with Amazon, but with a very strong will of win. Learn fast, that wants to do stuff, and it's a very good communicator that can be that person within the team that sometimes just speaks when there's something really wrong. And sometimes they need to be that person. They need to be the person that never says anything, but when they say, okay guys, this needs to stop, or and it needs to be a strong person to be able to manage that part too.
Paul Sonneveld
Thank you, Bruno. Appreciate those two callouts. Before we wrap up, I always ask and a couple of people know how to get hold of you, but for those listening in that don't know how to get a hold of you and they maybe want to have some follow-up questions or want to talk to you about some of these things, what is the best way to get hold of you Bruno? What's your preference?
Bruno Ferreira
So the quickest way, Paul is through my email, bruno@bluedotecommerce.com. My webpage is still not running live. It's there, it's live. It's forwarding people to my info email. I'm sorry I'm still a bit late. It's been a crazy journey. A lot of countries travel to help companies. But the quickest way is actually just drop me an email and I'll be in touch as soon as possible.
Paul Sonneveld
Fantastic. Well, it's been an absolute pleasure having you on the show again today, Bruno. Thank you so much. Your expertise is invaluable. Thank you for your generosity and I know this three-part series has come to an end, but we'll have to think of some new topics to cover. There's a lot more information there that we haven't explored, so, I look forward to meeting you back in the near future.
Bruno Ferreira
Thank you, Paul, and it's a pleasure. And yes, I have a couple of ideas to bring to people, maybe more dynamic actions. Let's think about something and we'll be back soon, both of us, I'm sure.
Paul Sonneveld
Sounds good. Thank you so much, Bruno. Take care.
Bruno Ferreira
Thank you, guys!
Paul Sonneveld
All right everyone. That is it for today's episode of Marketplace Masters. I hope you've enjoyed that. Make sure you check out merchantspring.io for special offers for Amazon vendors in terms of analytics and reporting. And keep an eye out for our next marketplace episode next week where we'll be talking about how to protect your seller health with Valerie from the US. Look forward to seeing you all there and in the meantime, have a wonderful week. Take care. Bye-bye.
