Sales & cost analysis

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Sales & cost analysis

  1. 1. Sales & Cost Analysis 1
  2. 2. Sales & Cost AnalysisDone for sales control: statistical purpose of sales control: A/cg analysis to determine profitabilityWhy Sales Control?1. Measuring Performance: Objective evaluation of sales efforts critical for growth Some measures: Sales / Quota ratio / Budget ratio, Closes / Calls ratio2. Identifying problems before they magnify: Inaccurate sales forecasts, low profit margins, low business, inability of Sales Management to maximize revenues to existing customers3. Identifying sales opportunities 2
  3. 3. How to manage Sales Control?1. Setting goals: Part of Sales Planning & Sales Budgeting process SP: Staffing, Recruiting, Training, Evaluation SB: Targets for Sales and for Costs associated with Sales2. Comparing actual with targets3. Taking corrective actionProblem in sales control1. External factors over which sales people have no control2. Inadequate information 3
  4. 4. Sales Analysis1. Gathering, classifying, comparing and studying sales data2. Converts row data from various sources into actionable information3. Helps in non marketing functions like production planning, cash management, inventory management etc.4. Managers have to decide on purpose of evaluation before doing sales analysis; simple sales analysis gives figures while comparative sales analysis sets standards5. Sales information systems use mathematical and statistical procedures to generate reports; managers have to decide which information to use for what purpose. 4
  5. 5. How to do Sales Analysis?1. Most critical element in sales analysis is sales information; most commonly used source for sales information is the sales invoice.2. Other sources of information include cash register receipts, sales person call reports and expense reports, financial reports, warranties etc.3. Different types of sales analysis could be : 5
  6. 6. 1. Sales Analysis by Region Region S. Quota Actuals Diff. Performan ce Index Sales/SQ × 100 West 10.25 10.20 -0.05 99.51 South 10.00 10.02 +0.02 100.20 North 9.75 9.73 -0.02 99.79 East 8.75 7.01 -1.74 80.11 6
  7. 7. 2. Sales Analysis by Sales RepresentativeSales Rep. S. Quota Sales Diff. Perf. Index Ravi 500.5 475.5 -25 95.00 Rahul 300.5 290.5 -10 96.67 Rishi 500.25 150.25 -350 30.03 Raj 425.75 400.75 -25 94.12 7
  8. 8. 3. Sales Analysis by Product for Rishi Product Quota (Rs.) Actual (Rs.) Diff. Tooth Paste 400 240 160 Soap 300 180 120 Cosmetics 500 220 280Rishi has problems of motivation, selling skills. 8
  9. 9. 4. Sales analysis by customer: Company can focus on promising segments5. Sales analysis by distribution channel: Can help in making elimination decisions regarding channels6. Sales analysis by units sold: Useful during times of inflation and price changes 9
  10. 10. Sales Audit 10
  11. 11. Sales Audit Periodic Review of Sales Activity Earlier Financial Review, but now done for HR, Marketing etc. A Sales Force Management Audit involves  Study of sales management environment (customers, economic, competitive, tech. legal etc.)  Study of sales department’s objectives, strategies, implementation.  Evaluation of the sales organization to its effectiveness  Evaluation of SM functions: recruitment, compensation, forecasting, training, budgeting 11
  12. 12. Sales Analysis focuses on ResultsCost Analysis looks into costs incurred toproduce results.Profitability Analysis would include SalesCost and Marketing Costs.Marketing Cost Analysis analyses salesvolume and selling expenses to identify theprofitability of sales activities. 12
  13. 13. Break Even Analysis(Unit SP × No. of Units) – (Unit Var Cost × No.of Units)Less fixed costs = Operating Income = 0Eq. SP = Rs.30, CP = Rs.21, Fixed Cost =Rs.36,000(30 – 21) × N – 360000 = 0or, N = 360000 / 9 = 40,000 (Break Even Point)Eq. Co. wants operating profit of 1,35,000(30 – 21) × N – 360000 = 135000So N = (360000 + 135000) / 9 = 55000 13
  14. 14. Return on Assets Management SalesContribution Margin / Net Profit × Sales Assets Management ICEBERG Principle Aggregating total sales figures & comparing with past data, wide peals & troughs of performance & causes problems. So analyze in detail. 14
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