Customer Finance Programs Key to Increasing Sales
While studies show that technology spending is once again on the rise, there’s a reason you haven’t heard a collective sigh of relief from the software industry. While many budgets are once again allowing for the purchase of enterprise software, hardware and peripherals, there’s no question that today’s purchasers are smarter, savvier and more selective than ever.
Even though the purse strings have loosened, competition is at an all-time high. It’s no longer enough to provide a software solution that meets the potential customer’s needs, or even to provide it at the best price. Today, smart vendors are constantly looking for ways to stay one step ahead of the competition.
While increasing sales is always part of a competitive business strategy, software development companies often overlook a simple method of accomplishing this objective – making it easier for customers to buy.
One option increasing in popularity among software vendors is to establish a customized finance program that provides no-hassle financing solutions for your prospective clients. In addition to “one-stop shopping,” your customers can reap the other benefits of financing that make it easier for them to commit to technology purchases, including:
100 percent financing — Many finance companies offer 100 percent financing for the cost of software and maintenance contracts, which requires no down payment. Because customers don’t have to come up with a down payment, they can make a purchase immediately, rather than hold up the sale with a “wait and see” mentality that often accompanies a dip into cash reserves. It also allows your customers to invest more capital in revenue-generating activities.
Improved Customer Relations
Shorter Sales Cycles
Another benefit is that as software needs are being discussed in the sales process, the finance specialist can work with the chief financial officer or accountant to determine which financing option and payment plan best suits business needs and cash flow.
Direct customer financing can also save software vendors millions of dollars each year by reducing the number of days a sale is outstanding. Consider a company with quarterly cash sales of $50 million. On average, it can take 45 days to collect payment. Assuming a borrowing rate of 6 percent, the 45-day lag in payment results in a carrying cost of $371,204. If the same numbers are run with a leasing finance program that generates payment within 2 days, the carrying cost drops $82,253, saving the company more than $288,951 in one business quarter.
The Big Picture
Generate larger, more profitable sales faster;
Partnering with an experienced finance company also means you can concentrate on what your company does best – developing software – while letting a finance expert handle the intricacies of a finance program. Put simply, by working with a third party, your company will receive all of the benefits with none of the risk.
Whether you choose to refer your clients directly to your financing program partner or to work with a third-party finance partner to develop an in-house program, it is essential to choose an experienced equipment finance partner. During the sales process, the finance expert will be working closely with your customers, and it’s important that his or her actions and service levels reflect your company’s ability to meet your customers’ expectations. When searching for a finance partner, look for a company that:
Is flexible and willing to work with your management team to develop a program that will meet your financial objectives;
RJ Grimshaw is director of sales, vice president of Key Equipment Finance’s Information Technology Group. Key Equipment Finance (www.KEFonline.com) is one of the nation's largest bank-affiliated equipment leasing companies. Grimshaw has more than 10 years of leasing industry experience. He can be reached for questions at 713.354.4545.