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Why a CRM Platform is Essential: Shedding Light on the IT Challenges of LMDs at Scale
At the heart of the constantly-evolving last-mile distributors (LMDs) lies the pivotal role of Information Technology (IT) infrastructure, which acts as the backbone supporting the efficient management and scale-up of businesses. As LMDs venture to expand their services and reach a broader customer base, the significance of a robust IT infrastructure becomes clearer. As evidence of the industry's growth, the Global Distributor’s Collective (GDC) Digital Service Catalogue currently showcases 70+ different IT solutions for LMDs, from which a handful are generic, but most are specialised tools suitable for almost all business functionalities.
The expansion of distributors into new markets most certainly requires establishing a reliable IT infrastructure that can withstand the demands of scaling operations at the last mile. From data management and security concerns, to seamless payment processing and device compatibility, distributors face a complex web of challenges. These include addressing the limitations posed by infrastructure in remote areas, ensuring real-time data synchronisation, maintaining compliance with various regulatory frameworks, and empowering field agents with the necessary IT tools, among others.
On the other hand, the amplification of small human errors across different processes in the last-mile distribution value chain and the potential consequences of inefficiencies on customer trust and reputation may cause significant obstacles to the sustainable growth and success of operations. Understanding and effectively navigating these challenges is essential for distributors to exploit the full potential of IT in their pursuit of a more inclusive and impactful last-mile distribution.
This being said, amid the pursuit of growth, LMDs encounter multiple challenges around IT that can have widespread ramifications on their success. In this article, we look into the crucial importance of specialised IT infrastructure for scaling operations by illustrating a handful of key challenges faced by LMDs as they aim to navigate the complex field of IT while expanding their services to new horizons.
The attempt to scale with generic IT tools
As it’s well known, distributors in the sector often start their operations with limited resources and budgets, making it challenging to invest in specialised software or platforms such as PaygOps. In the early stages of their business, they usually rely on using generic tools like QuickBooks, or Google Sheets, as alternative solutions to manage their day-to-day operations. While these tools are not specifically designed for last-mile distribution business models, they offer basic accounting and data management functionalities that can help small distributors keep track of their financial transactions, customer data, and inventory.
For instance, some LMDs use Xero or Quickbooks to generate invoices and record basic payment information, or Google Sheets, to maintain simple customer databases and track product usage. However, among many other limitations, the restrictions of those tools in terms of data entry are noteworthy. For comparison, Xero is designed for about 2,000 transactions per month and the low and mid tiers of Quickbooks allow for only up to 10,000, which may suffice for a small sized company, but can soon enough become a liability, given a scaling LMD in the Paygo/Solar sector can manage hundreds of thousands of contracts. PaygOps, on the other hand, is significantly more flexible, allowing users to manage several millions of payments a month.
Now, higher-end generic software platforms such as SAP, or the Enterprise tier of Quickbooks have a similar or larger data input buffer and could be better suited to scaling needs than the previously mentioned generic tools, but present one major downside: they’re historically known in the market for being very expensive solutions. According to multiple sources (1, 2, 3, 4), SAP Business One implementation, maintenance (∼600 USD per user per year) and customisation costs are very high, and a price increase depends on the geographical location. As per consultant firm Seidor, the roll-up costs depend on the solution's complexity, the number of users, user licence types and the preferred hosting platform. “Considering all the different factors, if you required a 20-user solution, you'd be looking at an initial investment of around £70k. That’s £3,500 per user for the first year, a figure which may increase depending on how you’d like your solution to work for you”, the consultant firm adds.
In our experience supporting the sector, 20 users would only suffice to manage an average ∼100-200 active clients monthly. In contrast, an LMD at scale could easily manage ∼20,000 active clients a month and would need to employ ∼1700 agents, each one of them with access to the management tool. By that logic, if we calculate the price of SAP Business One for an LMD of that magnitude, the costs would simply be unaffordable.
On the other spectrum, PaygOps Premium is a CRM tailored to the needs of LMDs at scale with incorporated advanced features for sales, lease, after sales management, that bases its pricing on active contracts per month (starting at $0.21 USD per active contract), with an unlimited number of user accounts, no limitations around operation size, and fixed fees for further customisation. Thus, a large LMD managing a portfolio of ∼20,000 active clients would need to budget up to 1 million USD in annual maintenance costs for a tool like SAP Business One in order to effectively manage such a volume of contracts, as opposed to the $50k annual maintenance costs of PaygOps Premium for the same volume of contracts.
Taking into account that the average LMD in the sector spends $25,000 USD with some of them spending up to $100,000 USD, it comes as no surprise why a specialised CRM platform like PaygOps adapts better to the realities of this industry.
Putting aside the data entry flexibility/limitations and affordability aspects, generic IT tools can naturally come in handy for very specific functions of early-stage LMDs, but are not fully suitable for those wanting to scale because they simply lack the necessary flexibility and advanced functionalities required to handle the unique characteristics and complexities of LMD models (i.e. Paygo, Microfinance, others).
Last-mile operations involve dynamic payment structures, real-time data synchronisation (between field agent mobile app, desktop interface and third-party apps), seamless integrations with TelCos and Mobile Money, and specific customer management needs at the very last mile that go beyond the capabilities of standard accounting software like Xero, QuickBooks and SAP. That’s where the value of specialised software providers comes into play, as the latter can offer comprehensive IT infrastructures that are thoughtfully developed to serve last-mile operations, with a few of these software providers (such as PaygOps) having firsthand experience as former Paygo/SHS distributors, thus better understanding the challenges of last-mile companies and how to tackle them effectively with flexible IT solutions.
Specialised CRM platforms have become so sophisticated that distributors at scale are no longer required to develop their in-house infrastructure. According to CGAP (2018), “we are already long past the point where Paygo providers need to develop their own product management software. Specialised partners can do this faster, better, and cheaper. And as the Paygo solar sector continues to mature, greater specialisation can enable broader participation from a wider range of actors”. Large companies, with the capacity to build and develop in-house solutions value the reliability of specialised software, and are now migrating into commercially available solutions, as they look to focus their resources on other aspects of the business (discover how we supported Azuri Technologies in doing so in our latest success story).
For a quick reference on the kind of complexity CRM platforms need to support and why generic tools fall short when backing a distributor at scale, here’s a representation (from GDC State of the Sector Report, 2022) of all the areas, across company, field and customer operational levels that LMDs require digital solutions for:
While generic tools lack the advanced features required to cover the wide range Paygo operational needs, they can serve as provisional measures until the distributor grows to a point where they can invest in dedicated platforms that offer tailored solutions to support their unique business model. As we covered in a recent study from PaygOps and Persistent (formerly Enable Digital), it comes as no surprise that the need for effective technology solutions grows as a company scales, and the return on investment in sophisticated IT solutions appears increasingly attractive as companies grow. Additionally, companies that have more mature IT early-on in their own growth are often better able to prove their scalability and appear more attractive to investors.
Payment reconciliation and discrepancies
Payment reconciliation and discrepancies represent significant challenges to pay special attention to for scaling last-mile distributors due to Paygo being such a dynamic payment model, along with the high volume of transactions that companies handle, real-time data synchronisation needs, device and connectivity challenges, and the always present potential for human errors.
Managing a growing customer base with varying payment amounts and frequencies can become complex and time-consuming for a distributor at scale, especially when using non fully suitable tools like spreadsheets. Integrating payments from multiple platforms and methods (Mobile Money, Cash), handling currency conversions, and addressing customer disputes further add to the complexity. Automated payment reconciliation systems with real-time data visualisation, synchronisation and reporting capabilities are, therefore, essential to ensure accurate financial records and compliance as the business scales.
In order to better understand why payment reconciliation can pose a challenge for growing LMDs, let's explore two common scenarios:
With off-the-shelf tools: A distributor invests thousands of dollars to build a custom integration between their Mobile Money provider and an off-the-shelf software like Xero or Quickbooks. However, when entering the account references around payments, their agents mistype parts of the information and, given those software tools only work if there's a proper match in reference, a very large number of the payments will still need to be manually reconciled by someone in their offices, which takes them significant man hours, so they end up doing double work and wasting the investment in such an integration. | With in-house tools: A distributor develops the tool themselves, but is not careful when rounding payment amounts, or fails to follow best practices when handling financial data. Logically, a difference in cents replicated millions of times can lead to huge financial losses. Another big challenge they might face when building an in-house solution is security, as they might not have the resources to constantly update their libraries and servers to fix vulnerabilities nor have the resources to deeply review their code for security, which can then expose them to hackers stealing their data and giving it for ransom. |
To address payment reconciliation challenges effectively, LMDs often need to invest in specialised payment reconciliation or comprehensive CRM systems. A specialised last-mile management platform can help to efficiently manage payment reconciliation and mitigate discrepancies by allowing LMDs to securely process and manage different kinds of payment, and leveraging a wide array of functionalities within the platform, such as: one-time cash payments, down-payments, collecting and tracking repayment of loan offers throughout the customer journey, among others.
Thanks to several country-by-country payment solution integrations made possible between CRM software providers and Mobile Money providers, these payments can be collected and reconciled to customers’ contracts in an automated and seamless manner. PaygOps, for example, has vast experience working with multiple TelCos across Africa and, therefore, can offer seamless integrations. Moreover, the software has a very sophisticated and highly customisable payment reconciliation system, which was thoughtfully developed to handle many edge cases of users, such as: typing the wrong account reference, automatically reconciling from phone number, mistyping or leaving out some characters, or clients paying for other clients, among others. Overall, having advanced features that can leverage so many different aspects of the data collected from the end client on PaygOps, drastically reduces the number of payments that require manual reconciliation which, in return, saves a great amount of time for LMDs.
Leveraging Automation Across the Value Chain
Automation plays a pivotal role in mitigating human errors for last-mile distributors. As companies scale and the complexity of their operations and data processing needs grow, manual processes naturally become prone to errors and inefficiencies. For instance, small mistakes in data entry or calculation can have a ripple effect on the accuracy of the entire reconciliation process. By embracing automation, LMDs can streamline critical tasks around payment processing, data entry, inventory, and customer management, drastically mitigating the risk of human errors.
Ideally, according to a GDC report (2021), “LMDs would choose all-in-one solutions with automated workflows and data combined on dashboards that help managers make daily decisions. However, the reality is that LMDs use up to seven different, often non-connected digital solutions as the industry remains largely fragmented. This creates data silos, duplication and inefficient processes.” On the other hand, a CRM software like PaygOps can fully cover what LMDs need to scale in terms of IT infrastructure, by providing a flexible management platform complemented with additional Custom Workflows and Customised Dashboards.
Seamless data synchronisation and custom workflows between a specialised management platform and virtually any other third-party app that the distributor requires can enhance accuracy and eliminate the need for repetitive manual interventions across several processes, enabling distributors to focus on providing higher quality services to their expanding customer base and investing their time into other parts of the business. Through automation, last-mile distributors can bolster operational efficiency, enhance customer satisfaction, and build a sustainable foundation for growth in the dynamic landscape of last-mile operations. We invite you to join our upcoming webinar to discover the full potential of Custom Workflows and how these cutting-edge integrations can enhance scalability for LMDs.
Some time ago, for example, we designed a custom workflow for a client to streamline their inventory management by integrating PaygOps with Unleashed, so that stocks were always up-to-date as per sales and loan values captured on PaygOps. The integration reduced not only their staff’s workload, but also several risks. Shortly after the custom workflow was put in place, the distributor reported that thousands of customer entries, sales orders and stock adjustments were created automatically every month, largely reducing the need for weekly stock counts and manual reconciliations, as well as the risk of typos and inaccuracies in serial numbers, stock levels or valuation.
Within the first three months after the implementation of this custom workflow for inventory management, the cost of logistics and warehouse staff dropped by 85%. Faulty and repossessed products were better tracked and could be reused or claimed for warranty, resulting in savings of up to 98% of their value. Taking into account both the cost of the IT infrastructure and integration, as well as the operational cost reductions, the total savings per year for the client were estimated to be 85% of the initial costs.
“By essence, Custom Workflows reduce the workload of anyone involved in the process. The more clients you have, the more you need to automate, so that you reduce margin for manual error at every step of the process. It’s very critical that all the integrations work smoothly and are tested properly for any scale up, especially in terms of inventory integrations, because inventory reconciliation can impact the organisation financially.”
Simon Schaffner, Senior Software Solutions Specialist, PaygOps.
Custom workflows can effectively adjust to whichever part of the business and whichever type of LMD is required. For example, last year, renowned agritech provider One Acre Fund not only decided to adopt PaygOps as their core IT infrastructure (from using spreadsheets before), but entrusted us with the development of custom workflows for several parts of their business operations: inventory management, product delivery management and credit scoring.
Thanks to the custom workflow set up between PaygOps and the agri business’ inventory management system (Erply), the end customers can now buy and pick up products within only ~1-3 days as opposed to the 6 months they had to wait before having the integration.
The agri provider is now able to address edge cases such as inventory write-offs throughout the client journey, offer home delivery, leverage data to automatically assess the farmers credit score, among several other additions (read the case study here) that are allowing them to fully revamp their business model, in their efforts to scale faster and more efficiently. The enhancements brought by custom workflows have thus translated into increased customer satisfaction, given One Acre Fund’s workforce can now make the most of real-time data automatically synced across tools and processes to leverage their decision making and serve more end customers, faster and better.
In a nutshell…
1. Generic tools such as Xero and Quickbooks can work provisionally for very specific functions of early-stage LMDs. However, they present noteworthy limitations in terms of data entry capabilities. The higher-end generic tools like SAP are exceedingly more expensive than PaygOps and still lack the complex functionalities needed to effectively manage last-mile operations. On the other hand, as former LMDs, we’ve experienced firsthand the unique needs of LMDs, which allows us to tailor our IT solutions more comprehensively to the dynamics of the sector.
2. A flexible and secure CRM platform like PaygOps, with real-time data synchronisation, built-in auditing tools, robust reporting capabilities and seamless integration with TelCos can significantly help LMDs to streamline payment reconciliation processes, minimise errors, and ensure accurate financial records as the business scales.
3. As LMDs scale, the need for automation becomes more pronounced. With PaygOps’ Custom Workflows, LMDs can streamline critical tasks around payment processing, data entry, inventory, delivery and customer management, drastically mitigating the risk of human error, thus saving time and resources across several parts of the LMD’s operations.
About PaygOps:
Solaris Offgrid's flagship software, PaygOps, enables credit to be provided to the bottom of the pyramid for essential products like solar home systems, agritech inputs, clean cookstoves, water pumps, etc. The end customers pay incrementally via Mobile Money under a Paygo model. PaygOps provides the software infrastructure to manage the contracts, payments and related communication for the local retailers of such products. Our affordable modular and interoperable solution connects energy and payment methods (Pay-as-you-go, mobile money) to a suite of enterprise applications that allows the smooth management of lease financing and field operations, while providing key financial data and metrics to investors.