Question

Which of the following can have a negative impact on a customer's profitability?

	a.	Number of required sales contacts (phone calls, visits etc.).
	b.	Special shipping instructions.
	c.	Accounts receivable collection time.
	d.	Purchase order amendments.
	e.	All the above.

Answer 1

All of the above can have a negative impact on profitability of a customer. Let us know examine how :

a) Number of required sales contacts : Sales contacts are essential and during pre-sales activity and during after sales service can play a good role in building a brand. However sales contacts ( phone calles , visits ) do carry a cost elements with them and when the required sales contacts are more than required , this can lead to excessive selling costs and thus impact the profitability.

b) Special shipping instructions : Requring shipping in other than usual way will enhance costs. Special packing or transportation can be example of this.

c) Accounts Recivable Collection Time : If this time is longer , the costs will be higher as more working capital will be required in over all cycle. The amounts are yet to be recovered meanwhile amounts are required for fresh sales.

d) Purchase order amendments : Depending upon the terms , if the rates are increased, cost will also increase and hence an impact on profitability.