Imagine this: A customer rents a unit only to find out it’s not actually available because it was over committed on another contract. Your customer wants to work with you. But they’re on a tight deadline and can’t wait for the unit to be returned. The customer calls one of your competitors and moves on.
“Why,” wonders your newly suspicious customer, “is it such a frustrating experience to know if a unit I reserved a month ago won’t actually be available because it was already committed to someone else when it was so easy and efficient to order it?”
It’s not the question you want your hard-won customers asking themselves, is it? But it’s so easy to have it happen.
Is it time to replace your rental software?
The bottom line is that reservation logistics are difficult. Each reservation requires a coordinated multi-departmental effort and impeccable service under acute deadline pressure just to walk a customer back from the point of frustration.
That’s why every contract or repair situation fundamentally has the opportunity to spiral into customer dissatisfaction. Preventing this from happening can have major positive impacts on profitability, though. A frequently-cited Harvard Business School study found that increasing customer retention rates by just 5% can actually increase profits from 25% to 95%.
Because of the inherent risks to customer satisfaction in over-committed reservation situations, strong rental software automation is a necessity for optimizing customer retention efforts for companies with even moderate order volumes in the equipment and party/event rental industries.
Is your rental software up to the task?
Ask yourself the following 3 questions to see if you might be missing an opportunity to improve your customer retention and profitability with better rental software functionality:
- Do you have the flexibility to support your preferred policies and processes?
- Does your rental management module integrate seamlessly with related ERP functions?
- Are you able to access the business intelligence data you need to make good decisions?
Let’s take a closer look at each question.
Do you have the flexibility to support your preferred policies and processes?
It wouldn’t make much sense for a construction equipment rental company to have the same billing policy as a medical device rental company. But it really doesn’t take that extreme a discrepancy in business models to generate substantial policy differences. Just take a look at the fine print on the pricing website pages from various big-box rental companies to see that even very similar businesses can have profoundly different billing policies.
The reality is that there is an enormous variety of possible combinations when it comes to setting up your company’s rental management policy. There’s ultimately an optimal path for you and it’s important that your software supports it.
When choosing software for your rental management needs, some important areas to check for functional support include:
- Billing flexibility. Not every billing procedure is the same. In some instances, you may have escalated billing and in others you may bill monthly on a recurring basis. Further, not every customer is the same. Some customers may receive special rates for certain items or even different billing procedures than you have for your average customer. Capable rental management software needs to support each relevant billing option.
- Rental management. For complex products or broad product portfolios, managing rental inventory typically involves extensive data management. Not only must software provide detailed information about where the equipment is located and when, the ability to track service/maintenance data is also key to accurately establishing an accurate calendar of reservation dates.
- Change orders. Especially in situations where change orders are made at the customer’s discretion and there is significant handling work involved, having a change order process fees can help optimize your workflow.
- Delivery, pickup and service routing. Who is responsible for dispatching drivers for delivery or service routes? Who maps their drive? How many extra miles lead to overtime and wasted fuel that eats away your profit? Advanced, “SMART” delivery routing technology can strengthen your hand.
- Inventory management. What happens to returned goods after a contract? Are they returned to the original warehouse/location, serviced and made available to rent again? There are situations where each outcome makes sense and adequate rental software should support processes for each alternative.
Does your rental management module integrate seamlessly with related ERP functions?
Whether it’s for a rent, sale or service, rental management inevitably involves cross-departmental processing. System integration between your rental management module and other ERP applications is critical for a few main reasons:
- Integration allows for real-time communication, which helps decrease rental management processing turn-around time. A recent study found that in 55% of customer defections, one of the attributable root causes was service issues “not being resolved in a timely fashion.”
- Software integration eliminates the need to waste employee time on fundamentally unproductive tasks related to manually re-entering data—providing a reduction in labor overhead.
- Avoiding re-entering data also helps ensure the minimization of manual errors at a sensitive point in the customer relationship when there is typically a thin margin for error.
A comprehensively integrated rental management module should connect with all of the following ERP modules in order to support the tasks identified below:
- Sales orders. Updates of customer histories and generation of new billing documents.
- Equipment maintenance. Assignment and tracking of repair, replacement, or refurbishment tasks.
- Quality management. Tracking of root conditions for returns and repairs.
- Accounts payable. Issuance of customer refund checks.
- Accounts receivable. Updates of AR records for crediting customers with outstanding balances.
- Payroll/commissions. Commission and paycheck adjustments.
- Warehouse/inventory. Instructions for restocking, receiving, and shipping.
- Generation of PO’s for replacement products.
- Order status tracking for customer-facing sales personnel.
Are you able to access the business intelligence data you need to make good decisions?
As important as the automation benefits of properly integrated rental software can be, improved decision-making based on better business intelligence is likely to be the most significant benefit.
Consider an example:
A party and special event rental company studies their rental management data and finds an opportunity to improve on their rate of sale item returns. They utilize the data to track a major root cause of the refunds to their warehouse operations. Many of the orders it turns out are being improperly prepared or shipped. Recognizing that most mistakes are based on human error, the company implements an automated rental management system. The effect? An ounce of prevention is worth a pound of cure. The company manages to eliminate over-committed reservations by 100% and add to their bottom line by plugging several billing leakages.
In order to allow for similar improvement initiatives, reporting features in your rental software should provide the raw data to answer the following process optimization and accountability questions:
- What are our top rental and sales items?
- What are our most profitable inventory?
- What is our utilization rate for those items?
- How many contracts do we currently have open?
- What’s our standard reservation time?
- What is our average Days Sales Outstanding (DSO)?
- What are the primary causes of equipment failure?
- Based on current maintenance requirements, when will a particular unit no longer be profitable to rent?
- What’s the true cost of doing business with a demanding customer?
- How many unnecessary miles are being driven on delivery and service routes, and how does that translate into overtime pay or fuel costs?
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