Month-end Madness

hockey-stickDo you have a “hockey stick”, where most of your bookings occur right at the end of the month, quarter, year? If you have a “hockey stick”, it is very hard to have consistently predictable revenues. Growth, profits and market value suffer when revenues are not predictable. Many companies experience 50% or more of their quarterly sales coming in during the last week or two of the quarter. The V.P. of Sales loses a lot of sleep, the CEO gets irritable and the rest of the executive staff loses confidence.

When orders look weak midway through the quarter, management applies pressure to “pull next quarter’s orders in”. The reps’ only choice may be to offer a discount to entice customers to cooperate.  Whether or not they are successful in the current quarter, there is a reinforcing effect and customers learn to hold orders to the end of the quarter to get a lower price in the future. The net effects are a “hockey stick” and lower prices which can lead to significant profitability and cash flow concerns.

Vicious Cycle: With constant pressure to manage operating expenses the supply chain can end up reinforcing the month or quarter end splurge as supplies are expedited to meet the spike in demand, or replenish the stocks that shipped out all at once.  Expediting or pulling in digs a hole creating future shortages; a self perpetuating cycle of feast and famine.

What to do?  Change the systems – discounts, incentives, compensation, culture.  A tall order but it can be done.