Tuesday 9 December 2008

Canadian and Other Non-US Currency Quoting Cautions

With the economies of the world struggling and in some cases dropping in the tank, we have seen a roller coaster ride of ups and downs for our product pricing.

This is what our Canadian dollar looks like against the United States dollar today from XE:

The Canadian Dollar Today

Ouch. :(

Prices in the distribution channel have only started increasing in the last two to four weeks for us. In some cases, we received price increase warning letters from manufacturers that we are registered resellers for. In others, Synnex Canada has been pretty good about e-mailing us with price increase warnings.

Pricing volatility has played havoc on our quoting which we normally allow 30 days for. Lately, we have reduced that to one business week.

As a result, we end up needing to buffer the quote up 5-10% (divide not multiply) to cover any immediate increases.

If prices remain relatively static, then when the time comes to issue an invoice for the deposit on the project, we will let our client know that we can pass along a 5-10% savings to them due to our pricing levels.

The tough spot was about three weeks ago when we saw the Intel Xeon E5440 Quad Core CPUs jump by close to $300 cost per processor and the RAID controller jumping another $150 in cost. Other components in the server build also saw some significant steps upwards in price.

We were able to talk to our clients and prospective clients about a compromise on our existing quotes. They understood that the economic situation was making things difficult for us. We ended up absorbing 50% of the cost increase for that situation. Another ouch, but at least they were happy that we took the time to explain the situation and split the difference with them.

For those of you in the United States, this situation may not be impacting your business, but for those of us outside of the U.S., we are, in some cases, being hit quite hard with the currency fluctuations.

Be cautious in quoting folks. Given the situation in the world, now is not the time to start losing on projects due to missed margins.

Philip Elder
Microsoft Small Business Specialists

*All Mac on SBS posts are posted on our in-house iMac via the Safari Web browser.

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