Transaction Pricing 2018-11-19T14:01:51+00:00
Transaction pricing

Transaction pricing

Transaction pricing is a technique to pricing that came into picture 10 years ago.

The objective was to identify the actual price that can be imposed to consumer after considering concession, deduction and refund.

Overview

If you identify the actual price then you could decide the revenue and also determine if the right price was charged for each customer and transaction.

The price of goods or services demonstrated respective to the same quantity of another goods or service. It helps to bias the price change due to inflation from real price changes.

Transaction pricing is the solution to outlive the current dip and to thrive when conditions upgrade.

The emphasis of transaction pricing is to confirm the literal price for each transaction including the list price and to decide which allowances and incentives should be implemented. For most of the companies, the directorate of transaction pricing is the most elaborative, time taking, system and energy intensive job included in achieving a price lead.

 

 

 

Sniffie and Transaction based pricing?

Sniffie helps its customers to make better decisions and better business by proposing the smarter pricing solutions to the clients. As a merchandising work increased, processing work and workforce is also increased. Considering the fixed pricing, the firms had to negotiate work fees with another firm each time they deal. Statistics to the efficiency improvement was not clear.

Element price

In transaction-based pricing, for each type of account transaction processed an element price is set. A service fee is anticipated by multiplication of element transaction charge and transaction volume. An increase in volume will increase the prices. Apart from transaction price, productivity of the company is evaluated in element price. A decrease in element transaction price will have direct impact in productivity of companies.

Cost groups

Accounts payable, accounts receivable, travel expenses, fixed assets and general ledgers are 5 categories of cost groups. To avoid an excessively complicated pricing scheme, one element price should be set for the accounting functions mentioned above. The cost of companies is broken up into 5 groups and transaction volume should be determined. When cost of accounting function is divided by transaction volume, element transaction price is achieved.

Cost reduction

Importance of transaction pricing is the primary aim in companies cost-reduction. The company must be self-sufficient to correlate the price of managing its accounting services, compared to paying any other to manage them. Pricing needs to be calculated precisely to genuinely award savings back to the company. An imperfect pricing method will cross subsidize cost and punish the inefficient companies.

 

 

 

Things to keep in mind when adopting transaction-based pricing

Transaction-based pricing have put forward remarkable advantages over fixed method of pricing, where service providers charge for workforce employed per unit of time. It increases the productivity since the service provider is paid for the quantity of work. The physics of transaction-based pricing is not solely about splitting a Full Time Effort cost by the production per year. Instead, it is the entire unique technique of seeing the administrative output. Usually, the service provider provides a base price for a specified volume band with a negotiated increase or decrease in price as usage fluctuates around the specified band.

Challenges

While transaction-based pricing can provide notable benefits to both consumer and service providers, its challenges cannot be ignored:

  • Complexity – Drafting and implementing a transaction-based pricing model is complex and requires a fine mastery of these transactions and their cost structure by both I.e. The consumer and service providers.
  • Forecasting Volumes- Forecasting a predicting a logical level of accuracy, providing a minimum volume dedication for economies-of-scale and planning for volume variations is a complex. Only a few consumers can perform in a systematic and consistent manner.
  • Shortage of Availability of Standard Data- As compared to unreliable benchmarks, lack of availability of reliable benchmarks, can influence the client’s ability to discover the commercial combativeness of a service supplier’s estimates.
  • Loss of Control- since day-to-day resource settlement and efficiency information are not obvious to the clients. It is believed by most of the managers and administrative staff that transaction-based pricing can cause loss in control.
  • Firm rework- transaction-based pricing has resulted in changes in some fields like budgeting (tracking inconsistent monthly / quarterly service cost); corporate finance (ensuring that invoices reflect accurate charges and credits); functional departments (affecting business process change); all departments (inculcating demand forecasting practices). For quality excellence, transaction pricing is emerging to enable companies to manage outsourcing costs based on business volumes. Instead of becoming the new ‘normal’, transaction pricing is only the beginning of innovative pricing models that will be created to give outsourcing clients alternative, smarter ways to pay for the services they use. Migrating from fixed pricing to transaction pricing is a change for the better

Strategy card

Strategic importance (retail) 82
Strategic importance (ecommerce) 82
Ease of use 71
Practical implementation 74