Managing Cash Flow

110 Analyzing the Sales Function
systems) to ensure that the sales function is performing effectively in accordance
with company direction so that sales performance coordinates with:
• Company plans. By customer and product line
• Sales forecasts. With a high percentage of real customer orders (80 percent
or higher)
• Customer service requirements. Before and after the sale
• Cash conversion requirements. Selling to customers with timely payment
records
• Other functions. For example, manufacturing, engineering, shipping, customer
relations, accounting, product service, and so on
• Product profitability. Selling the right product for the company, not to maximize
commissions
• Product cash flow. Selling products that generate positive cash flow for the
company on sales made
• Customer satisfaction. Selling what the customer needs
• Sales timing. Selling for the long term, not for short-term sales commissions
or sales incentives
• Internal ability to produce, deliver on time, and service the customer. During
and after the sale
• Inventory levels. Items to be sold from inventory, items to be made upon
receipt of the order, items to be discouraged
There are numerous methods for compensating sales personnel other than
on a strict commission basis. The company must evaluate the method of sales
compensation on the basis of whether it results in moving the company toward its
goals or tends simply to enrich the sales staff (often to the detriment of the
company).
The method of compensation must motivate the sales force to effectively sell
so that the company’s, the customers’, and the sales personnel’s needs are all met.
It must support the coordination of all of these factors and encourage the salespeople
to work together with the organization and its plans.
Other compensation methods include:
• Salary plus commission (over a specified level)
• Salary based on results (sales level plus customer service)
• Customer calls or contacts
• Variable commission (based on customers and/or products sold)
• Collections (payment based on sales collected)
• Profitability (payment based on sales profit)
• Customer base or territory
• Group compensation based on defined results
• Salary plus profit sharing
• Salary only