Run a Better Service Business

People often ask about inventory valuation using an alphabet soup of terminologies such as FIFO, LIFO or Averages.  These methods are fine from an accounting standpoint and maybe over a long period of time, but they are really not accurate for whats really going on in the day to day business.

Is there a better way?  Yes, High 5 Software has developed a better way of valuing inventory by using true inventory value in SME.  We did it this way because we had to in order to track serialized inventory and then achieved the benefit of better financial tracking.  See below for details and an example.

Inventory Valuation in SME

SME inventory management is BETTER than both FIFO and averages. In fact one of our customers just switched all inventory accounting from QB to SME because neither FIFO or averaging gives a complete picture.  For this customer, QuickBooks inventory valuation was wrong somewhere between between $0 to $4.2M, but they did not know until they tracked values in SME only.

Instead, SME uses ACTUAL costs. It tracks every lot being received and this is necessary for serial number tracking of parts. Now within a single lot, SME will use FIFO, but if one lot is different from another lot, it would use actual.

For example, you are selling Widgets and Equipment (serialized):

1. You order 10 widgets and 5 equipment today for $10 and $100 respectively. (Lot 1)
2. The next day you order 10 widgets and 5 equipment for $20 and $200 respectively. (Lot 2)
3. Total Widget inventory value is $300 (10*$10 + 10*$20).
4. You sell 1 widget and 1 equipment. SME allows you to specify the specific lot used or serialized equipment. Therefore you get real, true costing.
5. Let’s say you select the widget and equipment from lot 2. SME would deplete the $20 and $200 items. SME would tell you that the cost of items remaining are 10*$10 + 9*$20 for widgets or $280. A FIFO system would take the $10 part even though that’s not the one used and tell you inventory value is 9*$10 + 10*$20 or $290, but this is wrong!. An average system would say the average cost is $15 and say inventory is worth $285, which is also wrong.

So in summary, SME gives true inventory valuation instead of false accounting information. Over the long term FIFO and average may work out from an accounting standpoint, but wouldn’t you want to do better with SME?! Note that you can always run a report in SME to give inventory average numbers if you really want accounting right, but reality wrong numbers!

http://high5software.com/mediawiki/index.php?title=Inventory_Valuation

Why High 5 Software chose Microsoft Azure for its Cloud based Field Service Software

High 5 Software is moving rapidly into mobile and cloud solutions due in part to industry trends, but mostly to please customers.  SME Tech Portal is an example solution that leverages the best of cloud and mobile technologies to allow technicians in the field be able to see and manage work orders assigned to them.  From their laptops or mobile devices technicians can add/edit notes, add timesheet entries, add/remove parts, add expenses, and obtain customer signature.  This is a big compliment to our Service Management Enterprise software and we have the Azure team to thank.

We evaluated a number of different cloud solutions to achieve this goal and ended up selecting Microsoft Azure.  This was far from an obvious choice at first, but we now believe it’s a great decision.  This blog highlights the decision and our path before “seeing the light” of the benefits of Azure.  You see, many of the other cloud solutions are evolutionary and not too much different from a server in your office, but just “in the cloud”.  Azure on the other hand is revolutionary and I must admit I thought it was stupid at first.

We first started working with GoGrid and Amazon EC2 cloud solutions.  We were very familiar with these kind of “server in the cloud” solutions.  If you know how to manage a Microsoft server, then you will immediately know how to run a cloud solution like GoGrid and Amazon.  Sounds great, right?  You can still leverage your existing IT staff or knowledge directly into the cloud….

What we discovered when we first started working with Azure was there really is no server to manage.  What? Microsoft has tremendous server capabilities and I can’t manage it? What the heck!  I thought this was the dumbest thing Microsoft had ever done.  However, with the help of Microsoft Azure experts, I learned that Azure is different and you can totally ELIMINATE your Information Technology (IT) resources!  So, we pressed on.  We finally got it to work and at the same time I had an epiphany that Azure is revolutionary in it’s approach.  With Azure you go directly from development to deployment; the IT work is completely eliminated.  With Azure, IT is now taken care of by Microsoft Azure including server management, patching, etc.  We can now reallocate resources normally dealing with IT and server issues on more important tasks that directly benefit our customers.

So, now we are running our solutions on Azure and have more time to service and support our customers rather than dealing with IT and server issues.  Thanks Microsoft Azure team, for your help to see the benefits and congratulations on developing a revolutionary solution that leapfrogs other cloud solutions.

See our Press Release on Azure here:  http://www.prweb.com/releases/2011/6/prweb8554271.htm

Stanley Steemer Needs a Mobile Makeover
I really like Stanley Steemer. They have a well run service organization with good prices.Stanley Steemer Needs a Mobile Makeover, they really work well with the customer, and the results are excellent.  For these reasons I am a loyal customer.

Yesterday they called to see if I wanted my carpets cleaned and I said yes.  It was scheduled promptly for the next day. They showed up on time and did great work as usual.

But I couldn’t help notice they used an old Windows Mobile phone to handle the mobile work orders. Every time I signed the device the technician apologized “Sorry, It’s really slow”.  Their system makes you sign 2 or three times and each time I heard the same lament, “Sorry, It’s really slow”.  I think you really only need to sign two times, but I think it failed so I had to sign an extra time.  The techs don’t say sorry about their excellent work, so why should they have to say sorry about their mobile solution?  I suppose if you are in the cleaning business, appearances matter.  It is no surprise the Stanley Steemer van shows up bright, clean, and on time.  Seems to me that their mobile technician work order system should too!

At this point I told them that we provide service management software and I demonstrated the SME Android application. The techs kept saying “Wow, that’s fast”, “Wow, that’s really nice and cool”. They said they really need a new mobile solution and told me to contact the manager at the Woodinville office.

Wouldn’t it be great if Stanley Steamer techs could continue to provide excellent service without saying “Sorry” about their mobile solution!  I think it’s time that they upgrade, and I know a company that could help them out.

3 Success Factors in Running a Successful Service Businesses

In our work with service companies we’ve definitely noticed some trends.  Here are 3 success factors that you should know about if you run a service business.Perhaps they can help you be more successful too.

Success Factor 1:  Gain a large multi-site customer and deliver great service to them.

The most successful companies we work with have something in common even though they are in a variety of industries; they each have a large customer with multiple site locations and they provide great service to these customers.  I’m not saying this is easy, just saying that it’s a key component of successful service companies.   Here are some examples:

1. 1. One company services the phone systems for one of the largest banks in the U.S. The company acquired this bank customer a number of years ago and continues to serve them well.  This large happy banking client asked the company and High 5 Software to establish an integration between Service Management Enterprise (SME) and the bank ERP system to automatically send and update work orders.
   2. Another company acquired the contract to handle all the security systems for a nationwide burger chain.  The company leverages subcontractors around the nation to handle the installation and ongoing service and preventative maintenance of the security systems.
   3. Another company got their start working with a utility company to install and service equipment for a new energy savings program.  This company became the exclusive provider for this service.  The company later acquired large home improvement chains allowing them to expand into additional cities and states.

Success Factor 2:  Eliminate Information Silos by Coordinating Data and Systems

The worst situation is when a company is using  multiple spreadsheets throughout the organization, white boards visible only to a few people, and a number of unconnected systems.  This makes it impossible to get reports and key performance indicators to properly run the business.  Best in class companies have fewer systems to run their business and those systems are integrated together.  Example for a small to medium service business would be an accounting program like QuickBooks that integrates with a complete service management software solution plus an email/calendaring solution.  There are service management solutions with built-in accounting, but it’s difficult and costly  to find specialized accounting and tax experts who can work with these systems.

Success Factor 3:  Make Information Available and Visible to Everyone in the Organization

Everybody in the organization should be able to see what’s happening in the business at all times.  Reporting tools with visible monitors or online access assist greatly in this area.  Below is an example of a company that has 4 large screen monitors providing real-time information of what’s going on in the business so that anyone in the business can spot problem areas and help directly.

Whether you are currently using or considering using service management software from High 5 Software paying attention to these 3 success factors can help you to run a better service business.  The clients behind these stories have robust profitable operations with happy customers.  No matter what industry your service business is in, emulating these success factors can help you be more successful too.