Overview

In the previous chapter, we discussed the basics of retail business — its operations, various types, challenges, and opportunities. Let’s now focus on retail business planning in this chapter.

The ultimate goal of running a retail business is to make a profit. To ensure long-term success in serving customers, laying down the groundwork that will lead you to this goal is vital.

1. Define your retailing success

When launching your retail business, establish a clear business goal. According to Dan Ramsey in The Everything Guide to Starting and Running a Retail Store, success in retail falls into three main categories:

1. Financial Success: This means making profits, managing costs well, and keeping the overall financial health of your business in good shape.

2. Personal Success: This is about the satisfaction and fulfillment of the business owner or anyone involved in the retail venture.

3. Community Success: Achieving this involves positively impacting the local community through your retail business. It includes creating jobs, engaging with the community, and contributing to local causes.

2. Assess your financial assets

Cash flow issues are a common problem for businesses. According to a study, poor cash flow management accounts for 82% of business failures.

To thrive, prioritize growing your retail store’s financial assets. Before choosing a concept, assess your cash reserves, convertible equity, and available credit.

Liquid assets

Businesses depend on liquid assets for flexibility and the ability to adapt to sudden market changes or settle debts. You use these assets to convert to cash without a significant loss of value easily.

Businesses must have enough liquid assets to handle responsibilities like buying inventory, paying bills, and dealing with unexpected expenses. These include cash on hand and easily accessible funds in bank accounts.

Equity asset

Although turning your home or property into cash may not be easy, you can leverage the equity in these assets. Equity is the gap between their current market value (after deducting selling expenses) and the remaining mortgage.

Utilize your home equity to get funds for everyday business needs such as equipment, technology, and operational vehicles, ensuring your business has the necessary working capital. But beware, if your business doesn’t succeed, you might risk your home and business.

Credit asset

Good credit is vital for your business — it helps you get loans, credit lines, and favorable terms with vendors. A strong credit rating in retail is crucial; it can make it easier to secure a store lease, set up utilities, get wholesale merchandise on credit, and open various business accounts.

If your credit isn’t great during the planning stage, it’s wise to delay opening your store until you’ve improved it. Good credit makes dealing with essential aspects of your retail business, like leases and vendor relationships, much smoother and more favorable.

Other asset sources

Explore these alternative avenues to solidify your financial assets:

1. Business Partnership: Bring a partner to pool resources, skills, and capital, fostering shared responsibilities and potential business growth.

2. Business Loan: Secure a lump sum of capital through a business loan to cover startup, inventory, or expansion costs without compromising ownership.

3. Supplier Financing: Seek financing from your merchandise supplier, possibly through an exclusive agreement, for additional financial support in launching your business.

An alternative route: franchises

Consider opening a franchise store if you have assets but lack retail management experience. A franchise license lets you use another company’s business know-how, methods, and brand.

In this setup, you can sell a product or service using the original company’s name, usually for an initial startup fee and yearly licensing fees.

Pros:

• Proven Success: Franchises come with a proven business model, boosting your chances of success.

• Market Insights: Franchise owners get detailed information about the market that regular businesses may not have.

• Training and Support: People who run a franchise get training and ongoing support to help them run things smoothly.

• Buying Power: Through collective buying power, franchisees can benefit from better supplier deals and cost savings.

Cons:

• Financial Impact: Franchise owners might make less money because they have to pay upfront fees and ongoing royalties.

• Limited Autonomy: Franchise owners must follow the franchise’s rules, so they can’t make all the decisions themselves.

• Long-Term Commitment: When you join a franchise, you usually commit for a long time, maybe 5 to 20 years.

3. Determine retail concept profitability

1. Identify your profit model

In the retail business, numbers are crucial. To run a store successfully, you must understand your profit model.

Here’s a simple breakdown: Profit is the money you have left after subtracting all your business expenses from your earnings. If you save more money after covering all costs, that’s your profit.

2. Analyze retail costs

Tracking and managing your retail costs is crucial in the early stages of your retail business. When your business expenses go up, your profits go down.

To boost your retail store’s profitability, keep a tight rein on costs such as inventory, fixtures, equipment, overhead, taxes, and licenses.

Inventory

Managing inventory is your store’s main expense; restock items promptly after selling them. If a product isn’t profitable, replace it with something more lucrative and better suited to your customers’ needs.

To ensure your store’s success, closely monitor your inventory, understanding what sells and what doesn’t. If you can cut costs without increasing expenses, your profits will rise.

Fixtures and equipment

When opening small retail stores, owners often invest in fixtures and equipment upfront for long-term utility. Retailers may choose to build, purchase used items, or lease to cut down on initial and ongoing expenses.

The expense for fixtures and equipment varies based on the type of retail store. For instance, a discount store may opt for simple or pre-owned fixtures, while a jewelry store could invest in top-of-the-line display cases, a sturdy safe, and high-quality lighting.

Overhead

Running your store involves daily expenses known as overhead, which covers essentials like rent or lease payments. Certain overhead costs may fluctuate based on your store’s operating hours and utility usage.

In bigger retail setups, employee wages can significantly impact expenses. Yet, for small retailers, taking charge during operating hours and minimizing vacations can help cut costs and reduce income loss.

Taxes

Inventory and equipment taxes are non-negotiable, whether you’re making a profit or not. Consider getting an accountant or tax advisor before starting your business. Neglecting taxes and licenses has led to the closure of many small businesses.

3. Calculating your target profits

Boost your retail store’s success by ensuring you earn more than you spend. Keep a close eye on your profits to keep your business on track.

• Target income: Align your profit goals with realistic revenue targets based on financial needs, and regularly assess the local market’s capacity to meet these targets. If goals seem unattainable, adjust profit expectations, reduce needs, or refine the business concept for viability.

• Target expenses: To succeed, make sure you cover your expenses, but be careful not to compromise on the quality of your stock and risk losing customers. Balancing expenses, inventory costs, and product quality is essential for retail success.

4. Figuring the ROI

Ensure your retail store’s return on investment (ROI) exceeds the loan interest, as lenders will likely require it. Remember that the potential return is linked to business risk, so evaluate your venture’s risk profile to set realistic expectations for investment returns.

Based on the associated risks, anticipate an 8-12% return on your retail store investment. This return compensates you for your investment and work, while external investors receive their share.

5. Estimating inventory requirements

Your most significant expense is inventory. As your business plan takes shape and your store is up and running, you’ll need more precise numbers. For now, use these figures to establish inventory targets.

Turnover

Find your store’s inventory turnover rate by calculating how many times you sell your stock in a year. Aim for a typical turnover rate, like the common goal of 2X (twice a year) for small retail stores. 

Get guidance on your expected turnover rate by consulting trade associations, wholesalers, or distributor salespeople, considering your store’s size and location.

Initial inventory

Determine your desired turnover rate, then use it to calculate the initial inventory for your store’s opening day. The accuracy of your inventory estimate depends on how accurately you define the turnover rate; the more precise the rate, the better your estimate will be.

Replacement inventory

Replenish sold-out items with similar products based on sales patterns. Good managers analyze sales data to restock items with higher profit potential. 

For example, if blue vases make $1.00 profit and green ones make $1.50, adjust the inventory by decreasing blues and increasing greens to boost the store’s growth.

4. Writing your business plan

Create a precise and accurate business plan to navigate the launch and operation of your retail store. Plan the specifics of how you will achieve your retail objectives.

Direct lenders, like banks, require a comprehensive business plan, while other investors need clarity on fund utilization and repayment. Major suppliers may request a business plan summary before offering credit for initial inventory.

Here are the key elements typically found in a successful retail business plan:

• Business cover page: Name, location, and participants.
• Table of contents: Guide to primary plan sections.
• Executive summary: Brief overview for quick understanding.
• Business concept: Detailed store description, including location, hours, staffing, and main inventory.
• Market analysis: Defines target customers, their demographics, and reasons for choosing your store.
• Management team: Identifies owner, manager, and key employees with credentials and experience.
• Financial projections: Estimates startup and operating costs, funding sources, sales, cash flow, and other financial details.
• Call to action: Concise statement specifying desired reader action.

Also read: Discover 20+ Top-rated Project Management Software!

5. Adjust your retail business planning

When you do retail business planning, changes are inevitable. Don’t just assume customers will come if you build something; instead, focus on building what customers want. 

To guide your adjustments, you should consider these three questions:

Will it work? 

Before you start a retail business, check essential things like market research, local demand, customer needs, competition, potential profit, and resources you need to succeed. Make intelligent choices so your investment of money and time pays off with a profitable retail business.

What can be improved?

Think about improving your product. Identify changes that will attract more customers, increase profits, and help you reach a larger audience. 

In retail, it’s crucial to meet your customers’ needs. Know your target customers, understand what they want, and adjust your business to serve them better and make more profit.

What makes it stand out?

Stand out from competitors by giving customers a solid reason to choose your store. Create and implement a unique retail concept that makes your store genuinely distinctive.

Summary

New retailers may struggle to profit and satisfy customers without a solid plan. It’s crucial to assess finances and understand the store’s profitability to navigate the challenges of the business world effectively. 

A well-thought-out business plan serves as a roadmap, enhancing the retailer’s ability to run their store successfully and succeed in the competitive retail landscape. In the next chapter, we’ll explore finding the ideal location for your business.

References

Ramsey, D., & Ramsey, J. (2010). The Everything Guide to starting and running a retail store: All you need to get started and succeed in your own retail adventure. Adams Media.

As companies in Indonesia continue to grow, so do the challenges facing their Human Resources departments. HR teams are entire, from recruitment and retention to employee development and payroll management. 

But with the latest developments, many of these challenges are addressed through Human Capital Management (HCM) software.

In today’s world, technology plays a critical role in the success of HR departments. With remote work, AI, and data analytics on the rise, it is more important than ever to have the right tools in place.

Fortunately, there are many HCM software vendors available today. But with so many options, it can be challenging to determine which is best suited for your organization’s needs. 

This article will act as your HCM software comparison. We will compare Indonesia’s top 10 HCM software providers in 2023, so you can find the best fit for your HR team.

What is HCM software?

Human Capital Management (HCM) is a way of managing employees to help a company succeed. It includes things like finding and hiring the right people, training them, making sure they develop new skills, and keeping them happy so they stay with the company.

HCM software is the digital tool that Human Resources (HR) uses to streamline HCM. Typically, the software comes equipped with tools for data analysis, monitoring employee performance, and automating HR tasks to enhance efficiency for HR teams.

Benefits of using HCM software

HCM software can simplify HR tasks, help ensure compliance, and retain employees. The system leads to many benefits for organizations and their HR teams, including:

Streamlined HR process

HCM software vendors help HR teams do their work faster and with less effort. It does things like hiring new employees, onboarding, managing how they are doing at work, and keeping track of their information. When companies use HCM software, their HR departments can focus on other essential projects.

Make data-driven decisions

HCM software keeps all employee information in one place, so there are fewer mistakes caused by manual input. Accurate reports and employee information can help companies make informed decisions. Companies can save more money in the future by not spending on ideas that are not proven to work.

Enhance employee experience

By providing self-service portals, employees will be more engaged and satisfied. HCM software makes it easy for employees to access their information and request time off, benefits, and training. In addition, employees will feel valued when companies use software that helps advance their careers.

Better workforce planning

HCM software can help you understand what is happening with your employees in real time, like how many people are working for you, if people are leaving, and how well everyone is doing. The software can help you make intelligent choices about planning for your workforce and business strategy. This information lets you make informed decisions to help your business grow and thrive.

Regulatory compliance

Following labor laws and regulations is vital to avoid getting in trouble. HCM software can help with this by keeping track of important information about your employees, like how many hours they are working, how much time they have taken off, and what benefits they have. Using HCM software ensures you follow the rules and avoid getting fined or having legal problems.

Read more: The 15 Must-Have Payroll Software Options in 2023

Tips for choosing the right HCM software

Choosing an HCM vendor can be daunting, especially when many options are available. As a business owner or HR professional, you want to select software that meets your organization’s unique needs.

Here are five essential tips when choosing an HCM provider with a user-friendly, feature-rich, integrative, secure, and scalable system.

Usability

Look for HCM software that is user-friendly and easy to navigate. The software should be intuitive and require minimal training for your employees. A user-friendly interface can improve productivity and efficiency by reducing the time and effort needed to complete tasks.

Features and main functions

Think about what your company needs to manage its employees well. Look for HCM providers with software that can do important tasks for human resources like payroll, benefits, tracking attendance, managing job performance, and recruiting new employees automatically.

Integration

Pick HCM software that works smoothly with your existing software and systems. Doing so avoids confusion and makes your work more efficient by making everything work together. It can also save you time and prevent mistakes from happening.

Security

Keeping your employees’ information secure is crucial. When choosing HCM software, look for features like data encryption, secure login, and access controls. This way, only authorized people can access and view sensitive information, such as employee performance reviews and payroll details.

Scalability

As your business grows, your HCM needs will change. Choose software that can scale up or down with your business requirements. The software should be flexible and able to handle a growing number of users, employee data, and new features.

Read more: What is ERP?

Comparing the best HCM vendors of 2023

When it comes to choosing the right HCM software, there are many options out there. But how do you know which is best for your organization? This section will act as an HCM software comparison to help you make an informed decision.

1. Impact vs. Workday

• Target market: One of the most significant differences between these two HCM providers is their target market. HCM Impact is designed for small to medium-sized businesses, while Workday towards mid-sized to large enterprises.

• Ease of use: Both Impact HCM and Workday have easy-to-use interfaces. Users praise HCM Impact for its simplicity and ease of use, with an intuitive interface that does not require a long time to master. Some users find Workday’s mobile application easier than its website.

• Customization options: Impact HCM has more customization options than Workday. It easily integrates with other business apps and features like employee management, attendance, leave, salary, allowances, and tax management. Workday has limited options for customized reporting.

• Pricing: Impact HCM offers a flexible subscription model with competitive pricing. Workday does not publicly release pricing information and requires users to contact them directly for a quote.

2. Impact vs. Oracle cloud

• Features: Impact offers various business features, such as employee management, tax management, attendance, leave, salary, and allowance. Oracle Cloud has all business HR needs, with a consistent look on desktop and mobile devices.

• Interface: Impact has a user-friendly interface. Oracle, on the other hand, has an older design. Some users find the HCM provider’s software slow and complicated to use.

• Pricing: Impact HCM provides flexible pricing and state-of-the-art technology to streamline operations. Oracle HCM’s pricing starts at $13/employee/month, with a free trial available.

3. Impact vs. SAP SuccessFactors

• Features: Impact HCM includes employee management, attendance and leave management, salary and allowance management, and tax management features. SuccessFactors features cover business alignment, employee performance, recruitment, and training as part of the SAP product suites.

• Target market: HCM Impact suites small to medium-sized businesses. SAP SuccessFactors suites all business sizes.

• Customization options: Impact is flexible and can be customized to meet specific business needs. Users can easily add more features as their requirements evolve. Impact utilizes advanced technology to make data usage more efficient and improve productivity. On the other hand, SAP SuccessFactors have limited customization options and outdated modules.

• Interface: Impact has an easy-to-use interface that users can quickly grasp. SuccessFactors, on the other hand, has a slow interface that requires additional training to use.

• Pricing: Users can adjust Impact’s pricing based on their business requirements. SAP SuccessFactors have an annual pricing of $85/user/month for companies with up to 100 employees. It has no free trial available, and its implementation may be more costly than other HCM vendors.

4. Impact vs. Netsuite

• Features: These two HCM software vendors offer similar features on their systems. They both manage employees’ attendance, salaries, and financial information. Impact HCM is explicitly designed for Indonesian businesses and can handle local tax management automatically.

• Ease of use: Impact has a simple interface for easy usability. Netsuite HCM may have an outdated design.

• Pricing: Impact HCM is not as expensive as other HCM vendors. You can choose and pay for only the features you need. On the other hand, Netsuite can be costly for small companies and startups. With Netsuite, users pay an annual fee covering the central platform, additional tools, and user count. There is also a one-time implementation fee, and no free trial is available.

5. Impact vs. Epicor HCM

• Target market: HCM Impact and Epicor have different target audiences. HCM Impact is made for small to medium-sized businesses, while Epicor is mainly for legal, non-profit, and healthcare industries. 

• Functionality: Impact uses the latest technology to transfer data smoothly and efficiently. Epicor gives users detailed reports and analytics.

• Accessibility: Despite being one of the top HCM vendors, Epicor HCM is bound only to the desktop. The HCM provider does not have a mobile application.

• Pricing: Impact HCM allows users to choose their pricing options. Epicor offers something similar where the price is determined based on the user’s needs.

6. Impact vs Peoplesoft HCM

• Features: Peoplesoft HCM has a wide array of HR features. However, the HCM provider does not provide comprehensive features like Impact HCM. Impact has employee management, attendance management, and tax management features.

• Usability: Impact has a user-friendly interface. Peoplesoft HCM may be cumbersome and less intuitive to use. Onboarding users to use Peoplesoft can be challenging for many businesses.

• Integration: Impact has integration functionality with other business applications. It is convenient for companies that have diverse needs.

• Pricing: Impact HCM provides clear subscription plans that match specific features and benefits. On the other hand, Peoplesoft’s pricing relies on individual quotes, meaning customers must ask for personalized quotes to find the exact price.

7. Impact vs. Bamboo HR

• Target market: Impact HCM and Bamboo HR target small to medium-sized businesses.

• Features: Impact offers employee management, attendance and leave tracking, salary and allowance handling, tax management, and integration with other business applications. In contrast, BambooHR has the typical HCM features that businesses need. However, their payroll module is still developing.

• Customization: BambooHR’s “Essentials” package has limited customization. Additionally, their platform is only cloud-based. Companies can not host the software on their servers.

• Pricing: Both offer similar pricing plans. Impact provides flexible subscription plans to accommodate the unique needs of a company. The number of employees and the company’s specific requirements determine BambooHR’s subscription plans.

8. Impact vs. ADP Vantage

• Target market: Impact HCM suits small to medium-sized businesses. ADP Vantage, on the other hand, suits larger enterprises with over 1000 employees.

• Features: Impact HCM covers employee management, attendance and leave management, salary and allowance management, and tax management. ADP Vantage has tools for HR payroll, workforce management, benefits administration, recruiting, talent management, and employee onboarding.

• Ease of use: Impact HCM has a user-friendly interface. It also integrates well with other business applications. In contrast, ADP Vantage has an outdated interface. Users report states that the software has slow support response times with limited attention to specific queries.

• Pricing: Impact’s pricing is competitive, with customization available for specific business requirements. Vantage’s pricing is less transparent; customers may need to contact them directly for a quote.

9. Impact vs. Kronos

• Target market: Impact and Kronos suit small to medium-sized businesses.

• Features: Impact HCM covers employee management, attendance and leave management, salary and allowance management, and tax management. In contrast, Kronos has tools for managing various worker types, from full-time, part-time, and hourly employees.

• Interface: Impact HCM is known to be user-friendly. Using the latest technology, Impact HCM integrates well with other business applications. Kronos does not have a user-friendly interface. Some report the software to have limitations and a complicated initial setup.

• Pricing: Impact HCM has a competitive subscription plan for customers. Kronos’ pricing starts at $6/user/month with an additional mobile application.

Why Impact HCM is right for you?

Impact stands out by providing businesses with comprehensive features that effectively address their diverse needs. Impact HCM has you covered in managing employee information, handling attendance and leave, streamlining salary and allowance management, and efficiently managing taxes.

Impact HCM distinct itself with its user-friendly interface, making it easy to adapt to the software without extensive training. It keeps up with the latest technology trends, helping your company optimize data usage and efficiency. With this software, you can effectively recruit the right people and provide better employee evaluations.

The software seamlessly integrates with other business applications, allowing smooth data flow and collaboration across different systems. This level of integration eliminates the need for manual data entry. It reduces the chances of errors, saving you valuable time and resources.

HCM Impact offers competitive pricing, which gives you a good deal for the software’s features and benefits. The subscription plans are flexible and cost-effective for businesses of any size. You can customize the pricing options to match your company’s needs and budget.

Read more: ERP Software Comparison 2023 (Price, Features, & Benefits)

Conclusion

As technology integration in the workplace continues to increase, it becomes crucial for organizations to adopt the right HCM software to optimize their HR processes. However, it is important to regularly reassess and update the chosen HCM software to stay competitive in the ever-changing business environment.

After careful analysis and evaluation of HCM software comparison, Impact HCM has emerged as the top choice for organizations seeking comprehensive and efficient human capital management solutions. With its extensive features and user-friendly interface, Impact HCM effectively addresses the diverse needs of businesses.

To truly experience the benefits of Impact HCM firsthand, we highly encourage you to contact their team today. Take the next step towards transforming your HR processes and empowering your organization with the best HCM software in Indonesia

In the previous chapter, we delved into the world of market research for your retail business, uncovering valuable insights and trends that could shape your venture’s success. As you embark on your entrepreneurial journey, it’s time to lay a solid foundation for your business with a crucial tool: the business plan. 

So, what exactly is a business plan? It’s your roadmap, your blueprint, the compass that will guide you through the uncharted waters of business ownership. A well-structured business plan is your recipe for success. 

Whether seeking investors, securing a loan, or simply charting your path forward, a well-crafted business plan is your ultimate tool for steering your business toward profitability and growth. In this chapter, we’ll walk you through the process of creating a tailor-made business plan in nine steps for your retail venture.

What is a business plan?

A business plan is a comprehensive written document that outlines a business’s goals, strategies, and operational details. It serves as a roadmap for entrepreneurs and organizations, providing a clear and structured overview of how the company intends to operate, grow, and achieve its objectives. This document is not only used by small businesses and startups. Even well-established companies use business plans. 

A business plan typically contains these elements:

1. Executive Summary: A summary of the whole plan, highlighting the essential ideas.
2. Business Description: Information about the business, what it’s all about, and what it wants to achieve.
3. Market Analysis: Research regarding the industry the business is in, the customers, who the competition is, and what customers are like.
4. Marketing and Sales Plan: Strategies on how the business plans to get and keep customers, how it’ll set prices, and where it’ll sell its products.
5. Product or Service Description: Details about what the business sells, its uniqueness, and why people should buy it.
6. Operational Plan: How the business will run day-to-day, where it’ll get the things it needs, and where it will operate.
7. Management and Structure: Information about key figures and organization of the business.
8. Financial Projections: Numbers that show how much money the business expects to make and spend, like profits and losses.
9. Funding Request (if needed): If a business requires external funding, it must specify the amount needed and the purpose for which it will be used.
10. Appendix: Extra documentation and information like resumes, data about the market, and legal papers.

Business plans can be long, short, straightforward, or complex, depending on what kind of business it is and who will read it. They should be updated as the business changes and grows.

9 steps on how to write a business plan

Ensuring a well-organized business plan is in place for your company will help position it for success. Here are nine simple steps to write one, starting with the executive summary.

1. Write the executive summary

Start your business plan with a concise executive summary. This section is like the “quick start” button for your project. It gives readers a fast glimpse of your business, its purpose, and the most critical parts of your plan. Think of it like a trailer for an exciting movie — it should grab their attention and give them a taste of what’s coming next.

In the executive summary, focus on the key points. While making your business plan engaging and informative is essential, remember to include detailed information in other sections. This section is your chance to set the stage for the entire document. So, make it attention-grabbing, clear, and actionable. It’s the first thing your readers will see, so make it count.

2. Write the company description

Begin by painting a clear picture of your company. Provide a thorough description covering essential aspects such as your company’s history, its location, how it’s legally structured (like a sole proprietorship or LLC), and most importantly, the specific problem or need your business is here to solve.

This part is your chance to explain why your company stands out. What makes it unique? Highlight your strengths, expertise, or advantages that position your business for success.

3. List your business goals

When it comes to your business goals, make them crystal clear. Your goals should be specific so there’s no confusion about what you want to achieve. They should also be measurable, which means you can track your progress. 

Ensure they’re attainable, meaning they’re realistic and doable. Keep them relevant to your business’s mission and direction. Lastly, add a time element – make them time-bound so you have a deadline for accomplishing them.

Your business plan should include both short-term and long-term goals. You aim to achieve short-term goals quickly, typically within a year. They include increasing monthly sales or launching a new product. Long-term goals are the more prominent, overarching objectives you’ve worked towards for several years. These could be expanding into new markets or becoming a leader in your industry.

4. Describe your products and services

Your products or services are central to your business plan. Let’s focus on a dedicated section to give readers all the vital information they need. Begin by offering a detailed description of what you’re offering. Describe what makes your products or services unique, highlighting their features and the benefits they bring to customers. Clearly show how they solve problems or fulfill the needs of your target audience.

If you have any upcoming products in the pipeline, mention them here. Additionally, if your business holds any intellectual property rights, like patents or trademarks, explain how they contribute to your competitive advantage and profitability.

5. Conduct your market analysis

To begin, conduct extensive research on your market. It involves profoundly understanding your industry, target audience, competition, and current trends. Collecting data and insights to demonstrate your knowledge of the market is crucial, including estimating the market size for your products, determining your business’s position in the market, and identifying your competitors.

One way of doing this is by conducting a SWOT Analysis. The SWOT analysis is a tool that helps you look at your business’s strengths, weaknesses, opportunities, and threats. You often see it as a grid or a visual chart. It lets your readers quickly see what could affect your business and where you might have an edge over your competition.

Having solid research to back up your conclusions is crucial. It helps convince investors that you know what you’re talking about and lets you double-check your assumptions as you put together your plan. Both lenders and investors will want to know what makes your product different from what’s already out there.

Read more: Market Research for Retail: 5 Reasons Why It’s Important

6. Outline your sales plan

Defining exactly how you’ll sell your products or services in your business plan is crucial. After analyzing your market, you can break down your sales strategy into clear steps. 

Start by defining your pricing strategy — how much you’ll charge for what you offer. Next, outline your distribution channels, which are how you’ll get your products or services into customers’ hands. Then, describe your sales tactics, which are the methods and techniques you’ll use to make sales happen. Lastly, talk about your marketing efforts, which include how you’ll create awareness about your business.

Beyond this, clarify your approach to attracting and retaining customers. Outline your strategy for acquiring new customers through advertising, partnerships, or other means. Equally crucial is your plan for maintaining customers, which can boost revenue. Describe how you’ll offer excellent customer service, loyalty programs, or incentives to ensure repeat business.

7. Address operational needs

Now, let’s tackle your operational needs — these are the essential elements that make your business idea a reality.

When it comes to your team, clearly define the roles you must fill. Identify the key positions necessary for the smooth operation of your business. Explain the primary responsibilities of each team member. For instance, you might require sales representatives, customer support staff, or someone to manage your finances.

Consider what your business needs to function effectively. This section includes your physical workspace, whether an office, a storefront, or an online platform. List the equipment required, such as computers, machinery, or specialized tools. Additionally, consider the technology you’ll rely on, including software, websites, or digital systems to enhance operational efficiency.

This section demonstrates your grasp of the supply chain and contingency plans. Whether presenting this plan to others or using it as a guide for yourself, it’s crucial for making important decisions. For instance, it can help determine pricing strategies to cover estimated costs and establish when you anticipate breaking even on your initial investments.

8. Outline the structure of your organization

Explaining how your company is structured and who’s in charge of your business plan is essential. It means talking about the people in your management team, their qualifications, and what they do. 

Clearly defining the reporting structure and responsibilities within your organization is essential. The explanation will help ensure everyone knows how things operate and who to approach for assistance or inquiries. 

9. Present your financial projections

The financial section of your business plan is crucial. Regardless of how great your business idea is, its success ultimately hinges on its economic well-being. People want assurance that your business is financially stable for the long run.

In this part of your business plan, you should explain how your business will make enough money to repay loans or provide investors with a satisfactory return. The level of detail required depends on your audience and goals. Still, generally, you should include three main financial views: an income statement, a balance sheet, and a cash flow statement. 

It’s also a good idea to include financial data and projections. Accuracy is vital, so thoroughly review your past financial statements before making projections. Your goals should be ambitious yet attainable.

Why do you need a business plan?

Benjamin Franklin wisely stated, “If you don’t make a plan, you’re setting yourself up to fail.” Franklin’s quote means that success usually doesn’t happen by luck alone but by carefully thinking and organizing your actions.

Some entrepreneurs might think they don’t need a business plan. Still, Franklin’s words remind us that having a plan, setting goals, and thinking about possible challenges can significantly boost your chances of reaching your goals. Even the best business ideas won’t succeed without a well-thought-out strategy to make them a reality.

Here are some reasons why business owners should use a business plan:

To secure funding

A strong business plan is crucial for attracting funding from investors or lenders. Research from Palo Alto Software demonstrates its significance. 

They studied 2,877 entrepreneurs, revealing that those with business plans had twice the chance of securing funding. Among the 995 entrepreneurs with business plans, 30% secured loans, 28% secured investment capital, and 50% grew their businesses. In contrast, of the 1,882 entrepreneurs without plans, only 12% secured loans, 12% secured investment capital, and 27% increased their businesses.

The point is this: A good plan isn’t just about explaining your business to investors and showing them your vision. It’s also about proving that you’ve thought deeply about your business, its challenges, and the nuts and bolts of how it will make money. Just talking about your idea isn’t enough; a solid business plan shows your dedication and a clear strategy for success.

To guide decision-making

Many small businesses don’t make it past five years, but a good business plan can help change that. Think of a business plan as your business’s roadmap. It’s like having a guide that enables you to make wise choices when dealing with decisions or problems.

A business plan is essential for entrepreneurs. It’s not just about money. It’s also about running your business, working with your team, using technology, and keeping your customers happy. When you have a business plan, you can think ahead and solve problems before they become significant. It keeps your business on track with your goals.

Business plans are also helpful when you start working with new partners. A potential partner may want to see your business plan. Partnering takes time and money. A good outline can attract the right partners for your new business.

To secure better talent

Bringing in talented people and partners is crucial to make your business successful. A business plan plays a significant role in attracting talent at the right time. People who might work for your company want to know your goals, how you plan to achieve them, and how they can help.

Whether you need experienced leaders or skilled workers, a strong business plan can help you get the best people. It can also keep them motivated and committed to your business for a long time. Within it, you’ll introduce your leadership team and list the jobs you need to fill now and in the future.

Business plans are also helpful when you start working with new partners. A potential partner may want to see your business plan. Partnering takes time and money. A good outline can attract the right partners for your new business.

To be more adaptable

Business changes quickly. Product features evolve, new competitors show up, and the economy can shift. That’s why a business plan should be flexible. Having a plan makes adapting to market changes, customer needs, and industry trends easier.

To keep your plan flexible, you can include a risk assessment. Many big companies do this, but it’s crucial for new businesses too. You don’t have to cover every single possibility. Instead, show that you can handle changes as they come. Also, have regular check-ins to ensure your business is still going in the direction you originally planned.

To communicate better 

A business plan is a unique tool that helps you talk to your team about your business dreams and plans. It ensures everyone in your group understands what you want to achieve and keeps everyone focused on the same goals. This way, everyone works together towards the same targets, making your business more robust and thriving.

Furthermore, your team can rely on the business plan as a guide. It is designed to assist your team in your absence or when they require assistance. Ensure your staff understands that if they ever feel unsure, they can turn to the business plan to figure out what to do next, especially if they can’t reach you for an immediate answer.

The many different types of business plans

Now that we’ve discussed the importance of having a business plan and its various purposes let’s delve into the diverse types of business plans you can use. These different types cater to specific needs and situations, allowing you to tailor your planning approach to suit your business goals and circumstances. Let’s explore these variations to determine which fits your unique business scenario.

One-page business plan

You’ve got your detailed business plan, but sometimes, you need a shorter version to share with key stakeholders. That’s where the one-page business plan comes in. It’s a condensed version of your regular business plan, but it fits on just one page. It’s quick to read and gives the main info about your business idea and strategy.

Think of it as a mix between a business plan and a quick elevator pitch. Even though it’s short, it should still cover all the essential information from your entire business plan.

Here are some specific scenarios where a one-page business plan can be beneficial:

• Startup pitch to investors
• Business idea validation
• Internal planning
• Networking events
• Initial business planning
• Quick updates on the business

Startup business plan

A startup business plan is like a detailed roadmap for your new business idea. It does two main things:

1. Inside Help: It guides you and your team on how to start the business and get results from day one.

2. Outside Help: It shows banks and investors that your business idea is solid.

These plans can be pretty long, and that’s a good thing for investors — they like to see all the details. This type is popular in the tech industry. It focuses on getting a minimum viable product (MVP) first and then growing from there.

Here are the specific needs and situations where a startup business plan is applicable:

• Securing funding
• Business Validation
• Business development
• Team alignment
• Strategic planning
• Exit strategy
• Communication tool

Read more: Startup Essentials: Key Definition and 9 Mistakes to Avoid

Strategic business plan

A strategic business plan is a detailed document that maps out what your organization aims to achieve long-term and how it plans to get there. It acts as your roadmap, guiding your company’s decisions and actions for the next three to five years.

You’ll use this plan to ensure everyone in your organization, including your employees and internal teams, understand your company’s mission, vision, and future objectives. Your strategic plan should balance giving you a broad view of where your business will go and providing enough specifics to help you reach your goals effectively.

Here are the specific needs and situations where this business plan is applicable:

• Long term planning
• Goal alignment
• Growth and expansion
• Decision-making
• Performance measurement

Feasibility business plan

A feasibility business plan is like a decision-making guide. It helps you figure out if your business idea will work or not. These plans are usually used within a company and aim to answer two simple questions: Is there a market for your vision, and can you make money from it?

Unlike startup business plans, feasibility plans are shorter and more to the point. You don’t need to include big-picture ideas about your company. Instead, you concentrate on checking if your idea is doable and profitable.

Here are the specific needs and situations where this business plan is applicable:

• When going to a new venture
• New product or service launch
• Business expansion

Growth business plan

A growth business plan, or an expansion plan, is a roadmap for established companies to increase their market presence, revenue, and profitability over a specific period. It outlines the steps to achieve this growth, including the resources needed, such as funding, materials, staff, or additional facilities.

Unlike a startup plan, a growth plan is tailored for existing businesses looking to capitalize on opportunities and enhance their operations. However, similar to a startup plan, a growth business plan should be comprehensive, especially when the readers may not be familiar with your company.

Here are the specific needs and situations where this business plan is applicable:

• Expansion
• Increased market share
• Diversification
• Acquisitions
• Scaling operations
• Exit planning

What-if business plan

A “What-If” business plan is a tool for preparing your business for unexpected situations. Instead of sticking to a single strategy, it looks at different “what-if” scenarios and how your business would handle them.

For example, if you run a restaurant, you can create a plan to see how your business would deal with a public health emergency like the COVID-19 pandemic. The plan helps you come up with strategies to minimize the impact.

You can use this plan within your team to get everyone ready and share it with banks and partners to show them that your business is ready for tough times. It’s a way to be better prepared and more resilient.

Here are the specific needs and situations where this business plan is applicable:

• Expansion to a new market
• Product diversification
• Market fluctuations
• Regulatory changes
• Technology advancements

Read more: Business Model Canvas: 9 Components to Map Startup Success

Summary

Creating a solid business plan is essential to your entrepreneurial journey, whether launching a new retail venture or aiming to take your existing business to the next level. Your business plan acts as your guiding compass, helping you navigate the complexities of the business world with clarity and purpose. 

From defining your company’s goals and market analysis to detailing your financial projections, each step contributes to your enterprise’s overall success and sustainability.

The next chapter will explore another critical aspect of setting up your store location. Choosing the right site can significantly impact your retail business’s visibility, foot traffic, and overall success. 

Customer relationships are the lifeblood of a business’s success. However, we understand that it can be a daunting task.

That is where Customer Relationship Management (CRM) comes in.

CRM is a powerful strategy that helps your business manage customer interactions effectively. The solution helps boost sales and foster long-term loyalty with customers.

Indonesia’s CRM market offers many options, from established players to innovative newcomers. It makes choosing the right one an even more tricky task. We have created this comprehensive guide to help you choose the right system for your organization.

The guide includes information on what to look for in a CRM system. Also, it features a list of the top 20 CRM applications in Indonesia to aid your informed purchase decision.

What is a CRM application?

A CRM application is a business tool that helps companies maintain and improve customer relationships. It is not just software but a strategic blend of people, processes, and technology.

Applications for CRM get up close and personal with customer-related processes. It aids in forecasting, customer service, sales, and the study of consumer trends.

Modern CRM software enhances customer experience like never before. A company’s success depends on satisfied clients.

The importance of CRM applications for business

CRM applications are essential for businesses for these five reasons:

Facilitate customer data management

CRM systems automatically collect your customer data. It includes their contact information, purchase history, and preferences. The available data empowers effective personalized marketing campaigns.

Increase customer loyalty

CRM tools enable you to request customer input, which aids in assessing their satisfaction with your business. Additionally, CRM platforms empower you to interact with clients actively — enhancing their appreciation for your brand and solidifying their relationship with it.

Improves promotion strategy

With the vast data available, CRM makes marketing easier. CRM’s analytic capabilities allow for campaign tracking. You can measure a campaign’s success and make adjustments through data-driven decisions.

Integrates with multiple channels

CRM software seamlessly integrates with a variety of business channels. This function allows you to interact with customers across different touchpoints. As long as organizations have an all-encompassing view of their interactions, customers will enjoy a consistent experience.

Improves sales management

CRM applications provide businesses with tools to automate the sales process. With this feature, your team can prioritize leads and track their sales progress. Using analytics, companies can pinpoint areas for improvement and make decisions based on data to increase sales.

5 considerations for choosing CRM applications

There are various criteria to look out for before choosing a CRM system. Below are five critical capabilities of a CRM application that you need to consider.

User-friendliness

A CRM application should be easy for your sales team and other stakeholders. Search for a CRM with an intuitive interface, easy navigation, and minimal learning curve. Your team should immediately adopt and utilize the CRM without extensive training.

Customization options

Every business has unique processes and requirements. Look for a CRM that offers flexibility regarding custom fields, workflows, and automation options. You can customize the CRM to match your business processes and adapt to your evolving needs.

Contact and sales management features

A CRM is an essential resource for overseeing contacts and sales tasks. When selecting a CRM, search for all-inclusive functions such as monitoring leads, managing opportunities, and forecasting sales. Additionally, it should record interactions, save files, and offer insights into the sales journey. These features enable your team to handle customer relations and finalize transactions promptly and efficiently.

Complete data report

A good CRM should offer robust reporting for insights into sales performance and business operations. Look for a CRM with pre-built and custom report options and data visualization features like charts and graphs. These tools will help you make informed decisions and identify areas for improvement in your business.

Business process integration and automation

The perfect CRM effortlessly merges with your current workflows and systems like email, calendars, and marketing automation tools. Find a CRM with robust integration features and automation possibilities. Doing so will enhance sales procedures, increase productivity, and conserve precious time and resources for your company.

Read more: 16 Most Recommended Receipt Printer Software 2023!

The 20 best CRM applications in 2023

You can now view our list of Indonesia’s 20 best CRM applications. We have provided details on the unique features and prices for each product.

1. Impact CRM

Impact is a dynamic solution made for Indonesian businesses, offering comprehensive Enterprise Resource Planning (ERP) capabilities. Impact’s CRM tool can integrate with its various modules, including sales, purchasing, and omnichannel. The CRM application suits MSME businesses, startups, and enterprises.

Features:

• Enhanced Customer Tracking: Stay in the loop with customer status changes for smoother communication via direct messaging. Sales teams can keep tabs on customers for efficient relationship management.
• Better sales performance: You can plan your business activities based on sales scenarios. The CRM tool provides users with real-time data stored centrally for easy viewing.
• Actionable insights: You can track and analyze performance with custom reports on one dashboard. Make informed decisions with accurate forecasts. Ensure personalized follow-ups by recording every conversation with customers.

Price:

The basic package starts with a one-time fee of Rp99 million. Implementation costs an additional Rp50 million.

2. Microsoft Dynamics CRM

Microsoft Dynamics CRM is a tool to improve sales and marketing operations. It provides valuable social insights, business intelligence, and campaign management capabilities. It has three deployment options, cloud-based, on-premises, and hybrid.

Features:

• Managing customer opportunities
• Report generation and sales analysis
• Mobile application
• Sales forecasting

Price:

Ranges from $63/user/month.

3. Odoo

Odoo is an ERP system that assists you in managing business processes. It is an open-source ERP with over 30 applications covering various business needs. Besides CRM, Odoo offers accounting, inventory, point-of-sales (POS) applications, and other modules.

Features:

• Tailored dashboards and predictive analytics
• Automated tasks guided by sales scripts
• Instant messaging for real-time collaboration

Price:

Odoo offers a free basic package for one application. However, its standard package charges $7.25/user/month.

4. HubSpot CRM

HubSpot is a modern CRM application that has recently entered the market. It provides a unique tracking code for every HubSpot account, enabling users to monitor website traffic quickly.

Features:

• Effortlessly overseeing sales pipeline with complete visibility
• Automated sales log for better management
• One centralized location houses all the pertinent lead information

Price:

For large companies, HubSpot provides two packages – Professional and Enterprise. The Professional package starts at $1.781/month, while the Enterprise package starts at $5.000/month. The CRM suite is also available for individuals and smaller businesses. These start at $50/month.

5. Salesforce CRM

Salesforce is a cloud-based software that facilitates connections between sales, service, marketing, and more. The CRM application enables you to uncover sales opportunities throughout your entire business.

Features:

• Campaign monitoring
• Unlimited team collaboration
• Email integration
• Sales forecasting

Price:

Sales Cloud’s pricing starts at $25/month.

6. Zoho CRM

Zoho CRM enables businesses to connect, engage, and close deals smartly. With automation and comprehensive CRM tools, it streamlines operations for business growth.

Features:

• Seamless real-time email integration
• SalesIQ for customer tracking and sales analysis
• Improves email marketing
• Omnichannel for social media marketing

Price:

Zoho offers four different packaging options – Standard, Professional, Enterprise, and Ultimate. The price range starts from $14/user/month to $52/user/month.

7. SAP CRM

SAP CRM is a software suite that provides businesses with tools for managing and optimizing customer interactions and relationships. It offers functionalities for sales, marketing, and service processes. SAP initially offered on-premises CRM but shifted focus to cloud-based offerings for competitiveness.

Features:

• It offers a comprehensive view of the sales funnel across multiple channels
• SAP CRM provides analytical data to support reporting and decision-making
• Cloud storage for data
• Sales and marketing automation
• Tracking and forecasting

Price:

SAP does not offer a specific price range for SAP CRM. For up-to-date information on their pricing models, it is advisable to contact their representatives directly.

8. Oracle CRM

Oracle CRM is a comprehensive software solution that empowers businesses to streamline sales processes and enhance customer engagement. With its robust suite of tools, organizations can improve loyalty, retention, and business performance.

Features:

• Streamline the lead-to-cash process
• Boost team productivity with collaboration tools
• Enhance sales performance with forecasting, upsell, and commission management
• Simplify sales management tasks

Price:

The specific pricing details for Oracle CRM may vary depending on the edition and features needed. It is best to contact their team directly or visit their Global Price List.

9. Pipedrive

Pipedrive CRM is a customer relationship management software specifically designed to cater to the needs of salespeople. Pipedrive CRM’s core function is to acquire, organize, and share vital customer information, thereby contributing to a more efficient and effective sales process. The platform is a versatile choice for businesses of all sizes.

Features:

• Activity-based selling principle
• Sales software, email marketing software, and automation
• Business reporting and insights
• Integration with third-party applications

Price:

Pipedrive offers pricing plans that range from $14.90/month to $99/month. Different price points offer varying features and options.

10. Freshsales

Freshsales CRM, developed by Freshworks, is a customer relationship management tool for different industry verticals. The subscription fee for Freshsales is affordable, making it a budget-friendly option for small to medium-sized businesses.

Features:

• A comprehensive view of all customer interactions and activities
• Marketing task automation
• Multichannel communications
• Integration with other applications

Price:

Freshsales offers three plans — Growth, Pro, and Enterprise. Payment is annual, ranging from $15/user/month to $69/user/month.

Read more: 21 Best Cashier App Recommendations for Business in 2023

11. SugarCRM

Sugar CRM offers an overview of the customer journey, providing contextual intelligence for a complete customer view. Businesses can anticipate opportunities and make informed decisions when using this CRM.

Features:

• Sales collaboration
• Sales forecasting
• Workflow automation
• Self-service portal
• Connection to platforms like DocuSign and Slack

Price:

SugarCRM offers a variety of pricing plans tailored to different business needs. Sugar Sell starts at $49/user/month. Sugar Serve starts at $80/user/month. Sugar Market starts at $1000/user/month.

12. Creatio

Formerly BPM Online, Creatio is a no-code platform for CRM. Users can create apps, automate workflows, and more without coding. It merges CRM with industry workflows and offers templates and customization options.

Features:

• Comprehensive view of customers’ activities
• End-to-end workflow automation
• Real-time analytics and reporting
• Industry-specific workflows

Price:

From $30/user/month

13. Copper

Copper offers a CRM application that streamlines business operations by managing contacts, offers, emails, files, and more from a single dashboard. It also analyzes key metrics, such as sales revenue and lead tracking. With Copper’s automation capabilities, businesses can enhance productivity by automating almost any sales process.

Features:

• Lead management
• Forecasting and Customization
• Integration with Google Workspaces

Price:

The basic plan starts at $29/user/month.

14. Keap

Keap is a specialized software for small businesses that centralizes customer information and streamlines daily tasks, freeing time from repetitive work. This CRM allows companies to focus on growth and deliver excellent customer service.

Features:

• Task and sales automation
• Integration with Gmail and Microsoft Outlook
• Customized messaging

Price:

Keap offers two pricing plans. The Pro plan costs $149/month for 1500 contacts and two users. The Max plan costs $249/month for 2500 contacts and three users. Additional users will cost an extra $29 each.

15. Insightly

Insightly CRM is a user-friendly and customizable customer relationship management software for small to midsize businesses. It helps companies to manage sales, marketing, service, and app integration in one platform. Insightly streamlines sales, personalized marketing, and enhances customer support, making it a valuable tool for business growth.

Features:

• Contact and email management
• Social media management
• Pipeline and task management

Price:

Insightly is available in three plans. The Plus plan charges users $29/month. The Professional plan starts at $49/user/month. The Enterprise plan starts at $99/user/month.

16. Agile

Agile offers CRM software streamlining sales, marketing, and service in a single platform. Agile’s user-friendly applications are supported by cloud-based SaaS services for mobile access, enabling real-time data updates from anywhere.

Features:

• Contact management
• Sales and marketing automation
• Customer support through a helpdesk system

Price:

Agile CRM offers four subscription plans –- Free, Starter, Regular, and Enterprise. Pricing ranges from $14.99/month to $79.99/month.

17. Scoro

Scoro CRM software boosts sales processes and team performance. With its CRM module, you can easily manage the contact details of suppliers and customers in one place, simplifying filtering and searching.

Features:

• Contact management
• Sales pipeline management
• Real-time dashboard
• Planning tools

Price:

From $26/user/month

18. Accelo

Accelo CRM is a cloud-based software for small and medium-sized businesses. The system provides sales, project management, billing, and client service tools. With seamless sync for email, calendar, and contact tools, it streamlines operations and enhances productivity.

Features:

• Holistic view of business data and finances
• Seamless Quote-to-Project Conversion
• Project lifecycle Management
• Track and sync capabilities

Price:

Pricing starts from $24/user/month for its Cloud plan. The Premium plan starts from $39/user/month.

19. NetSuite CRM

NetSuite CRM is a robust cloud-based software for managing customer relationships, sales, marketing, and partner interactions. It provides vital features such as sales and marketing automation, customer service management, and additional functions to improve business capabilities.

Features:

• Sales forecasting
• Sales and marketing automation
• Reporting and analytics
• A comprehensive view of customers
• Time tracking of tasks and projects

Price:

NetSuite’s annual license fee comprises the core platform, optional modules, and user count. However, pricing details are unavailable on their website and require users to contact NetSuite for further information.

20. Zendesk

Zendesk Sell is a powerful sales force automation software that boosts productivity and streamlines processes. It provides enhanced pipeline visibility for sales teams.

Features:

• Intuitive user interface
• Automation and self-service options
• Omnichannel support
• Customization capabilities

Price:

Zendesk’s Basic plan starts from $19/user/month. Complete CRM capabilities would cost $99/user/month.

If you are involved in business transactions, you may have encountered the term “proforma invoice.”

Many businesses typically issue these documents to customers post-negotiations. The invoice describes the agreed-upon deliverables.

What is a proforma invoice?

Its name comes from the Latin phrase “pro forma,” meaning “for the sake of form.” A proforma invoice serves as a provisional arrangement outlining the terms of an agreement.

People often confuse proforma invoices with standard invoices. Little do they realize that a proforma invoice is temporary and requires subsequent issuance of an official document.

If you still want to know more about proforma invoices, we encourage you to read through this article. It will show you its definition, practical applications, and business benefits.

What is a proforma invoice?

A proforma invoice is a pre-sale document sent to buyers before the shipment or delivery of goods, serving as a preliminary bill of sale.

Sellers typically issue this document for the buyer to review. Once reviewed, the buyer will then agree on the purchase. The seller delivers the product or service that was agreed upon afterward.

The proforma invoice may be subject to change. It is a reasonable estimate to prevent buyer surprises from unexpected charges after transaction completion.

Proforma invoices give buyers a price illustration that includes an estimate of commissions, taxes, or shipping costs.

The difference between a proforma and a standard invoice

We mentioned in the introduction that people think a proforma invoice is the same as a standard invoice. However, the two documents are very different.

A proforma invoice is usually issued before a sale takes place. The seller often provides a pro forma invoice during a transaction’s negotiation or quoting stage. It is a tool to help buyers finalize the order details to decide whether to place the order based on the information provided.

Standard invoices are issued when the sale is complete. It is a formal payment request and includes the final agreed-upon prices, payment terms, and applicable taxes or fees.

As standard invoices formally ask buyers to make payments, it is legally binding. An issued invoice enforces the rights and responsibilities of the buyer and seller to meet the negotiated agreement.

Accounting books do not record proforma invoices. They are not considered completed transactions. Standard invoices, however, are recorded for accounting purposes by both the seller and buyer.

The table below should help you understand the main differences between the two invoices easily.

Read more: What is an invoice? Definition & 11 Invoice Examples

7 functions of a proforma invoice

Proforma invoices have several uses in commercial transactions. Here are seven standard proforma invoice functionalities that you need to be aware of:

Facilitate quotations

Proforma invoices provide a preliminary quotation or estimate to a potential customer. They can outline a possible transaction’s costs, terms, and details. The seller helps the customer understand the expected expenses of the goods or services.

Prepayment requests

Sellers use proforma invoices to request customer deposits before delivering goods/services. This function helps sellers mitigate risks in case of non-payment. Additionally, prepayment helps sellers manage working capital for production costs.

Read more: What is SCF? Definition, 6-Step Process, and its Benefits

Inventory management

Proforma invoicing can be a helpful tool for managing inventories in a business. You can efficiently plan and manage stock levels when you have a preliminary record of anticipated sales.

Customs clearance

Businesses involved in international trade often use proforma invoices. This document assists the import/export process by providing accurate information to customs authorities. Information may include product description, quantity, value, and relevant trade agreements/licenses.

Legal assurance

A proforma invoice is not legally binding. However, you can use it as a tentative contract agreement with buyers. Proforma invoices specify the transaction’s terms and conditions, including payment and delivery schedules. For both parties, this information offers a certain amount of security.

Fast-tracking approval process

In many organizations, an internal approval process is standard practice. These procedures can take time since you must navigate numerous red tape levels. Giving an estimate before the acquisition gets cleared speeds up the process.

Communication

Pro forma invoices make it easier for the buyer and seller to communicate. All parties will be aware of the costs and conditions of the deal. The document promotes openness and trust between the parties, facilitating easier economic transactions.

6 benefits of a proforma invoice

There are several benefits for businesses in using proforma invoices. Here are six benefits that we have compiled for you:

Makes businesses look more professional

A proforma invoice is given to clients or business partners to show their professionality. It creates an impression of security and trust by demonstrating how well-organized and open your company is.

Provides relevant pre-delivery details

All pertinent information regarding the order, such as the particulars of the items and the estimated cost, is included in a proforma invoice. The provided details make sure that both parties fully comprehend the transaction. Buyers and sellers will have less miscommunication, and they may manage their budgets more efficiently.

More commitment from buyers and sellers

The use of proforma invoicing encourages buyers and sellers to commit more fully. It doubles as a quote or purchase order for customers, which in many cases may be necessary to get the sale approved and the final invoice paid.

Streamlines the sales process

Everyone hates having to go back and forth when trying to purchase something. Proforma invoices eliminate this process by documenting and agreeing upon the terms of a transaction upfront. The process can save time, effort, and resources for the sales process. Additionally, it also minimizes communication breakdowns between seller and buyer.

Enables flexibility

Proforma invoices are not complete invoices. The pricing that is displayed is liable to change at any time. This flexibility is advantageous in dynamic corporate settings where frequent changes to orders or transactions occur.

Helps with negotiations

Proforma invoices provide a starting point for discussions and negotiations between buyers and sellers. Both parties can make changes according to their needs. Pro forma invoices also contribute to building long-term customer loyalty.

Proforma invoice use case

To better understand proforma invoices, here is a sample scenario in which a company utilizes this tool.

A small manufacturing company based in Indonesia receives an inquiry from a potential European buyer interested in purchasing many of their products. The company wants to provide the buyer with an accurate estimate of the costs and terms of the transaction before proceeding with the sale.

The Indonesian company creates a proforma invoice with detailed information about the products, quantities, unit prices, and applicable taxes or fees. They also outline the payment terms, shipping details, and other relevant terms and conditions.

The proforma invoice is a quote for the buyer, helping them review and confirm transaction details, assess total costs, and obtain financing. It also allows discussions and negotiations between the buyer and seller for any needed changes or clarifications.

Once the buyer approves the proforma invoice, they issue a purchase order to the seller, referencing the agreed-upon conditions. The seller then issues a formal commercial invoice based on the agreed terms, and the buyer proceeds with payment and shipment of the products.

This use case shows that the proforma invoice facilitates negotiation and agreement between the buyer and seller, ensuring transparency and accuracy. It helps establish a clear understanding of the sale terms and provides a basis for documentation and financial arrangements.

Elements of a proforma invoice

The primary purpose of a proforma invoice is to outline the details of a proposed transaction for the customer. Making one uses the same method as a standard invoice. Hence, it should contain identical information to the final invoice:

• The unique invoice number.

• Seller information (which includes full contact details of the entity/individual).

• Buyer information (which includes full contact details of the entity/individual).

• A detailed description of goods/services offered (includes quantity, unit price, and total price).

• Payment & shipping terms that outline agreed-upon terms of payment and method of delivery.

• If applicable, the pro forma invoice should show the expected added taxes & duties.

• A validity period indicates the timeframe for which the quotation is valid.

• If applicable, the invoice should include additional terms & conditions that oversee the transaction.

However, unlike a final invoice, a proforma invoice should have the following:

• The term “proforma invoice” to differentiate it from other invoices.
• The phrase “This is not a tax invoice.”

Example of a proforma invoice

Here is a proforma invoice sample to help you understand what it looks like.

Conclusion

Unlike standard invoices, a proforma invoice is not a formal payment request and is subject to change. Understanding the distinction between the two is essential as they serve different purposes

Proforma invoices are provisional documents that outline the terms of an agreement. They provide a reasonable estimate of the costs involved in a transaction, allowing buyers to make informed decisions before placing an order.

By issuing a proforma invoice, sellers can ensure that their buyers are well-informed about the transaction’s terms and prevent surprises from unexpected charges.

If you are looking for an efficient way to manage your invoices and streamline your payment process, consider Impact’s invoicing software.

Take charge and optimize your business operations with the convenience of automated invoicing, streamlined payment adjustments, and a unified taxation system.

Read more: Top 9 Invoice Software Recommendations and Pricing Analysis