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Bridging the gap between Sales and Finance


The sales and finance relationship is tricky, but necessary.  The Sales Team interacts with current and potential customers.  The Finance department is responsible for ensuring the company’s cash flow can support Operation’s efforts to meet these customers’ needs.  Following is an approach to make the partnership easier –

Establish Process with Controls

Sales activity should be flowed out to identify bottlenecks and risks.  If need be, policies should be established.  For example, it is difficult to ensure that decentralized national sales forces obtain the proper approval signatures from both the client and senior management.   A process should be established with timelines to make sure all approved documentation is collected and retained in one central location.  If during the course of the relationship, legal proceedings are necessary to ensure the collection of outstanding debts, these executed contracts will be required.

Production Planning

At the beginning of the year or at the time a new Sales Manager is hired, a full twelve-month sales plan should be established and approved by the Sales Executive.  The plan should include discounts offered and expected Marketing dollars utilized.  Expect that increased discounts and marketing dollars will be needed in highly competitive markets with a strong competitor(s).

Model Development

The most successful sales team I worked with was provided a simple financial model in excel, for their use.   Areas requiring variable inputs specific to the relationship were yellow shaded.  With this tool, sales personnel could easily input the variables missing and see the value of the relationship, at the point of sale.  Slowly but surely the sales team began to understand the drivers of revenues and expenses, when establishing a relationship.

Escalation Process

There will be situations when the model does not show the relationship is as profitable as required, by Finance department standards.  In this case, if the sales manager believes that the relationship should be established for strategic reasons, they need to have the ability to escalate the approval.  There are times when entering a relationship which is not as profitable initially, makes sense after some seasoning.  Other reasons may include a new product/program introduction or establishing a referral relationship.

Activity Tracking

Sales activities should be tracked via a sales manager specific scorecard which shows each individual and each of the contracts they manage.  Examples of items to be included  – revenues less discounts used, less marketing dollars used, customer service hours provided, commissions paid…  When this information is presented in one document, it is possible to see the profitability of every sales manager and the profitability of each relationship.

Scheduled Meetings to Discuss Results

Tracking reports should be discussed at monthly Sales meetings that include the Sales Executive and the responsible Finance Executive.  As the Sales Manager is intimately involved with the relationship, details not obvious by "the numbers" can be learned, which may impact collections and the future of the business.

The process established above provides a controlled, risk free way to achieve sales.  As outlined, finance will not be surprised by the results of the sales team.  Sales Managers will  have the independence to achieve company and personal goals.

What is your experience?

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