Microsoft 365 Solutions for Tracking Costs

Greenhouse growers face a volatile and changing market, making it more important than ever to accurately track cost. You must make sure that costing data is accurate for fertilizer or containers, packaging, soil, labor, electricity, and water, etc. But many growers operate with siloed data which doesn’t take all these factors into account. For instance, if a purchasing employee has a spreadsheet on their laptop for tracking cost and makes an edit to reflect a vendor increase in the cost of say, containers, someone in accounting isn’t taking this into account when determining how much it costs to grow an orchid. Then, your sales team may sell items at the wrong price, taking away your competitive advantage—turning into a snowball effect. And when you’re only able to see financials at the end of the month, it’s too late to adjust and make changes.

Here are some of the key reasons why defining product and service costs is important:

Pricing

Knowing the costs of a product or delivering a service helps organizations to set prices that are appropriate and profitable. Without an understanding of costs, it can be difficult to determine a fair price that covers expenses and generates a profit.

Profitability

When growers calculate the costs associated with producing or purchasing products or delivering services, they can determine whether they’re making a profit or not. This information is crucial for assessing the financial health of the business and identifying areas where improvements can be made.

Resource Allocation

Knowing the costs of producing products or delivering services helps growers to allocate their resources more effectively. If they understand the costs involved, businesses can make decisions about how to allocate resources such as labor, materials, and equipment.

Cost Reduction

Understanding the costs of producing products or delivering services can also help organizations identify areas where costs can be reduced. By identifying areas where expenses can be reduced without compromising quality, businesses can become more efficient and improve their bottom line.

Key Stakeholders Who Should be Involved

There are several stakeholders in an organization who should be involved in defining product and service costs, as the process can have a significant impact on the overall success of the business. The list includes but isn’t limited to the following roles:

Finance and accounting Teams

Finance and accounting teams should be involved in defining product and service costs as they have the expertise to analyze costs and identify areas where expenses can be reduced.

Operations Teams

The operations teams are responsible for the production, procurement, and delivery of products and services. They should be involved in defining product and service costs as they have first-hand knowledge of the processes and resources required to procure, produce, and deliver the products and services.

Sales and Marketing Teams

The sales and marketing teams are responsible for pricing and promoting products and services to customers. They must understand the costs associated with the products and services to set prices and develop marketing strategies.

Senior Management

Senior management should be involved in defining product and service costs as they’re responsible for making strategic decisions that affect the overall direction of the organization. They need to understand the costs associated with products and services to make informed decisions about resource allocation and pricing strategies.

Customers

While customers aren’t directly involved in defining product and service costs, they’re important stakeholders who can provide valuable feedback on pricing and product quality. Understanding the costs associated with products and services can help organizations make pricing decisions that are fair and competitive while meeting the needs of their customers.

Overall, it’s important to involve all stakeholders who have a vested interest in the success of the organization when defining product and service costs. By working together to analyze costs and identify areas for improvement, organizations can make informed decisions that drive growth and profitability.

Microsoft Business Tools Can Help with Costing

With an ERP system, everything is updated across the organization when one change is made, giving you the ability to see your margins and cost appropriately every time. Microsoft business applications include tools to help support organizations define product and service costs to track, report, and analyze the profitability, margins, and more.

Velosio’s ERP solution for growers combines Dynamics 365 Business Central (BC) and SilverLeaf integrates financials, production, inventory, shipping, and other key workloads, so you can manage, measure, and track performance in real-time, no matter if you’re in the office or the greenhouse.

BC and SilverLeaf assist with costing in the following ways:

• Reduce or eliminate manual processes and reliance on spreadsheets.
• Standardize processes and business data.
• Connect sales, finance, and operations with a single end to end solution.
• Track customer agreements to access details about prices, discounts, delivery dates, product availability, and fulfillment status.
• Integrate with ordering platforms used by your retail customers.
• Understand cash flow and financial state of business.
• Forecast yield based on production history.
• Monitor consumption rates, demand trends, and product popularity.
• Track inventory testing and related data for analysis and issue mitigation and effective production planning.
• Forecast demand to drive production plan.
• Procurement planning.
• Track expected vs actual cost.
• Understand the true cost of production.
• Track sales campaigns and impact on revenue from discounts and marketing efforts.
• View dashboards with expected output by location, variety, and other measures.
• Allows you to use preferred costing methods like LIFO, FIFO, standard or average.
• Can export to Excel and make mass updates to overhead and labor, etc., and import back in.

You can determine how you would like to analyze the data as well. With Role Center, you can define the data that’s important to you on a dashboard. Such as top five customers, favorite accounts, or an integrated Power BI report that you like.

Ornamental Tree and Shrub Client Tackles Costing

Challenge: An ornamental tree and shrub grower was having trouble understanding the associated costs of tree production because data was dispersed across different systems and spreadsheets. Calculating the cost of production per tree requires an understanding of not only the wholesale cost, but the labor, nutrients, and additional expenses. Having that information in real-time was a priority for the team. Tree and shrub pricing is sometimes determined by what the market will bear, but also needs to be based on building profitability for each varietal. “Many times, a big impact is made when the lowest performing SKU is eliminated, but we couldn’t determine what that was,” explains the VP.

Solution: The client investigated several different ERP systems and finally landed on Microsoft and partner Velosio. Velosio’s system demonstrations convinced them that the platform fulfilled their requirements, provided an updated and modern interface, included a clear vision for the future of the product, and would be very easy for staff to use now and in the future. “The big thing we wanted from a system was to be able to get margin by SKU and by customer, and we could see Microsoft Dynamics 365 Business Central would be more tailored to our business,” says the VP.

Benefits: The client can now determine what value they have in their crops as the trees and shrubs grow, even though they are not yet finished goods. The team also has a much better understanding of costing by tree/shrub, and can determine the correct pricing models, as well as which varietals are profitable, and plant more of those. Inventory valuation reporting now ties back to the General Ledger. They can also determine what trees/shrubs will be available to sell after the growing cycle and can account for things like an increase in fertilizer pricing (much of its fertilizer supply was affected by the ongoing conflict in Ukraine), with a mass update to the affected items.

Defining Cost is Essential to a Competitive Edge

Defining product and service costs is essential for any organization that wants to operate efficiently, remain competitive, and generate a healthy profit. By having a clear understanding of costs, growers can make informed decisions about pricing, resource allocation, and cost reduction, which can ultimately lead to greater success and profitability.

I hope that this information is helpful to you. Be sure to check out our other blogs on Turning Technology into a Competitive Advantage with Microsoft 365.

Power BI and Data-Driven Decisions for Greenhouse Growers

Microsoft 365 Solutions for Production Planning and Execution

Any questions? Contact us and we will be happy to discuss.