Consolidate Financial Metrics Post Merger
Once companies merge, it is essential that they gather the same financial data and calculate the same metrics. If the newly merged company does not track finances in the same way across the board, it will hemorrhage money.
Financial metrics are divided into two categories. First, companies need to assess the variable cost per shipment, and second, they need to calculate the inventory turnover.
Variable Cost Per Shipment
When determining the variable cost per shipment, companies need to assess the:
- Technical support
- Processing costs
- Inventory costs
- Warehousing costs
All of these costs need to be added together so companies can determine how much it really costs to ship products. This will help them determine if they are losing too much money on shipments.
Next, companies need to look at inventory turnover.
Inventory turnover is a figure that represents the number of times a company’s inventory is sold and then replaced. Inventory turnover is calculated by taking the sales and dividing it by the inventory. Businesses can also calculate inventory turnover by taking the cost of goods sold and dividing it by the average inventory. Either method can be used, but all parts of the supply chain should use the same equation.
Businesses need to keep an eye on their inventory turnover to determine how much working capital the new merger must have on hand at all times. Businesses that fail to have enough working capital on hand will not be able to keep their shelves stocked. That means they will not be able to sell products.
How an Integrated Supply Chain Can Help
When companies figure their metrics in-house, they often make mistakes. This is typically because different companies measure their metrics differently. However, a company’s supply chain software can ensure that all partners involved in the supply chain figure their metrics in the same way. This is done without any work from the company itself. The software figures the metrics and provides the companies with the data. The data is normalized so companies can analyze accurate information.
Financial metrics are never more important than they are after a merger. Companies need to determine if the merger is making or losing money so they can come up with an effective business plan. Be sure to use the same metrics across the board so you can get an accurate view of your new merger.