November 17, 2022

When is the right time to invest in a trade promotion management (TPM) tool?

by 
Nikki McNeil
Trade Finance
Featured

You should invest in a trade promotion management (TPM) tool with your very first Sales and Accounting/Finance hires. When these hires are made, distribution begins to grow, more promotions become established, and accounting starts to strengthen internal controls - especially as it pertains to validating promotional expenses as each expense directly affects your organization’s cash flow. (P.S.- our Emerging tier is one of the most affordable offerings in the emerging brand space!)


We talk to CPG brands every day about alternatives to TPM tools and help guide them to make the best possible decision for trade management. The primary alternative brands consider is Microsoft Excel/Google docs. While these tools certainly have their place, they simply don’t cut it when it comes to properly managing trade spend.


You may be wondering…what’s wrong with Microsoft Excel/Google docs? That’s an excellent question. I’ve personally utilized them both to manage trade spend, the second largest expense on the Income Statement, at the various CPG companies I’ve worked for in the past as an accountant. I’m not here to say you’re wrong in utilizing those tools; however, they’re not an efficient way to plan trade spend, especially as you begin to grow rapidly. Here are three big reasons why.

1. Manually entering in promotions line by line is an inefficient use of bandwidth. What if the details within a line change, such as expected spend, rate, product group, type of trade? How do you communicate this over to accounting to ensure they’re, one, authorizing each trade expense correctly and, two, accruing the correct liability? There are no internal controls set within Microsoft Excel, not to mention it’s challenging to stay organized within a spreadsheet and filing system. I don’t recommend going down the path of, “…well, we will save all email correspondence on changes in one folder…and updated contracts in another…” because that is far too cumbersome to manage, especially when it comes time for your organization’s audit.

2. With multiple individuals touching trade spend within your organization, inevitably something will be misplaced and/or overwritten. We’ve seen it before - corrupted files, missing contracts, incorrect hyperlinks, too many versions of your spreadsheet trade calendar, etc. Talk about endless frustrations and risks.

3. Keeping a trustworthy audit trail and tracking system of each promotion is one of the keys to success.How do you assign a unique identification code for each promotion planned? With these assignments, how do you know when you’ve accidentally planned two of the same promotions? Accounting needs to utilize these codes in order to report on actuals vs. forecast, including executing a recurring accrual by specific promotion planned. Just one wrong entry can wreak havoc on your cash flow which can have massive implications, especially for small and mid-sized brands. Also, this unique code is essential for financial reporting to show the story of progression from month to quarter to year versus prior year.

With the Vividly TPM platform, trade spend is treated as thoughtful, purposeful investments. Each promotion planned will go through a series of approvals within your organization as validation against company strategy. With a decade of experience, I’ve yet to see a brand properly execute this hierarchy without a TPM platform.


Trade Promotion Management platforms, like Vividly, make it a one-stop-shop for resolving all of the above challenges. Each promotion is housed within its own profile that generates an automated unique identifier and encompasses all details within the promotion contract including an audit log, unlimited attachments/notes, and approval workflow.


With trade spend making up, on average, 15-20% of gross revenue, investing approximately 1-2% of the overall trade spend budget into a TPM tool is a very small investment that not only harmonizes both Sales and Finance/Accounting but allows you to track a plethora of actionable data, such as:

- What promotions are executing

- What promotions shifted months/years due to phasing

- When the promotion executes

- What the expected forecast is, along with the latest estimate

- What general ledger account to authorize against

- How to analyze large deduction PDF data sets with an Excel extraction

- What your accrual liability is

As your organization grows, you can use your TPM tool to maximize the opportunity of trade spend: ROI analysis, indirect trade rate visibility, accrual methodologies by type of trade and customer, forecasting, budgeting, etc. As you can see, TPM tools are not just limited to planning promotions but allow you to dive deeper into actionable insights that allow your organization to scale. The right TPM tool put in place now, will help you grow into these areas in the future. Microsoft Excel will not allow you to scale.


Starting from the very beginning on a TPM platform will provide you with a consistent data set where you can easily reference prior period promotions and determine whether or not you want to rerun that promotion in future years. It’s all about creating a clean, trustworthy dataset from day one so your organization can learn, grow, and adapt accordingly.

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