Sales Control and Cost

Analysis
Companies need to have proper mechanisms in place so that
salespeople adhere to the top line and bottom line
objectives

Sales Audit is a systematic, critical & unbiased review and

appraisal of the basic objectives and policies of the selling
function and of the organisation, policies, methods,
principles and personnel employed to implement those
policies and achieve those objectives

Salespeople tend to lose sight of this core objective over time;

that is why this becomes critical
 Sales Control and Cost
Analysis
Key characteristics:
a) Objectives: Each sales function must have clearly stated
objectives. Like we want to achieve sales of 20 million
units this year without decreasing per unit profit by more
than 3%.
b) Company Policies: Are they in line with objectives or do
they need to be changed. E.g. the compensation
structure
c) Organisation: Does the company have the resources to
achieve the objectives? E.g. overstaffed or understaffed
d) Methods: Are the strategies appropriate? Will
discounting, for instance dent the brand image?
 Sales Control and Cost
Analysis
e) Procedures: Implementation of methods systematically,
through allocation of responsibility that is clearly defined.

f) Personnel: Checking whether the individuals are effective in

achieving the stated objectives in line with the defined policies.

Audits seek to answer 4 questions:

a) Who is buying what and how?
b) Who is selling what and how?
c) How is the competition doing?
d) How are we doing?
 Sales Control and Cost
Analysis
Sales analysis seeks to identify strengths and weaknesses in the
sales data like high turnover-low profit; good and bad customers,
high potential and low potential customers, respective
performance of sales territories etc.

Allocating sales effort: ‘Iceberg principle’ says that only a small

part of the total situation is visible; the rest has to be gauged
through sales analysis.
There are customers who account for a smaller percentage of sales
but time, money and effort to tap them is no less. These
situations must be analysed & corrective action taken.
The desirable outcome is that allocation be done based on sales
potential and actual sales.
 Sales Control and Cost
Analysis
Illustration of sales analysis:

Quota Sales +/- % age

achieved

New Delhi 5 3.78 -1.22 75.6%

Mumbai 7 8.35 +1.35 119.28%

Hyderabad 4 5.49 +1.49 137.25%

Chennai 3.5 3 -0.5 85.71%

Bangalore 2.5 2 -0.5 80%

Figures in Rs. Million unless

otherwise specified
 Sales Control and Cost
Analysis

The data must then be analysed in New Delhi, Chennai and

Bangalore to ascertain which salesperson (s) in these areas
missed the quotas. Then we can further analyse where he
missed the quota by factors like sales account type, or by
product line
 Sales Control and Cost
Analysis
Marketing cost analysis: This is done to judge the
profitability of various aspects of the sales operations. It can
be judged w.r.t. territories, sales personnel, product types,
accounts, etc.

Classifying sales expenses: They may be classified as

separable (direct) or common (indirect). Separable are
traceable to individual sales people, accounts, channels,
products, etc. Common expenses are for the entire company

For instance, salary is a common expense and commission is a

separable expense; even transportation. You cannot
attribute administration related sales expenses.
 Sales Control and Cost
Analysis
In marketing cost analysis, expenses data is grouped by
activity; for instance, all expenses related to field sales are
kept separately.

Common expenses have to be assigned logically to different

aspects of the sales operations.

For instance, if the company has a fixed salary component,

how do you divide it among products?

The final formula regards contribution by any aspect of the

sales function:
Sales – cost of goods sold – (separable expenses + common
expenses attributable on a logical basis)