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Planning the sales effort : sales control & cost analysis
‘ Sales controls : Objectives, process & difficulties

       To ensure the achievement of sales and profit objectives
                  sales people sometimes pay inadequate attention as they are caught up in the maze of
                   everyday activities - many related to individual sales personnel & customer problems – they
                   neglect long term perspectives
       To find out strengths and weaknesses, opportunities and threats to the organization.
       To locate the defects and take corrective steps to improve the situation
       by coordinating and controlling effectively various sales operations
          Control process : Sales Audit, Sales Analysis & Cost analysis


What is a sales control & cost analysis ?
Sales control and cost analysis is the function of the sales management of the company to ensure the
achievement of sales and profit objectives by coordinating and controlling effectively various sales
operations.
The sales control and cost analysis tools are :
    Sales audit
    Sales analysis &
    Cost analysis
These tools provide means to a sales management to find out strengths and weaknesses, opportunities and
threats to the organization. By using the above different tools of control, the management can locate the
defects and take corrective steps to remove the shortcomings and improve the situation and tone up the
functioning of his department.


Sales audit
Sales audit is defined as
    “ a systematic, critical and unbiased review and appraisal of the basic objectives and policies of the
    selling function and of the organization,
    methods, procedures and personnel employed
    to implement those policies and achieve those objectives”.
The main purpose of the sales audit is to find out the opportunities for improving the effectiveness of the
sales organization. It also brings out strengths and weaknesses of the individual sales personnel, which
allows the management to take steps to improve their functioning.
There is no standard methods of sales audit. Normally, a sales audit examines six main aspects of a sales
organization. They are
    Objectives
    (clearly set the objectives. For example if the co is already commanding 15% market share, then the
    objective is to increase the share by 10% next year)
    Policies
Planning the sales effort : sales control & cost analysis
    ( After setting the objectives the organization laid down the policies for achieving the objectives. Policies,
    both express and implied should be clear and consistent with the objectives. For example should the
    management follow a policy of promoting persons within the organization or should it hire from outside.)
    Organisation
    (with respect to the structure of the organization, whether the organization has the facilities and
    capabilities to achieve the sales objectives. For example, if overstaffed, it may achieve objectives but
    profit may fail. If there is a complement of inefficient personnel, then it may fail I its achievement)
    Methods
    (Management should devise and adopt proper methods and measures to implement the stated policies
    and strategies)
    Procedures &
    (Procedures should be clearly laid down. It should explain how to implement the policy to achieve the
    stated objectives. It should clearly assign the responsibility to specified persons who should be
    accountable for implementation)
    Personnel
    (All sales Personnel are subjectively evaluated as to their ability, efficiency and effectiveness in achieving
    pre-determined objectives, policies and other aspects of sales operations)


Sales analysis
Sales analysis involves a systematic in-depth study of sales volume operations to find out strengths,
weaknesses, opportunities and threats.
It tries to find out the sales and profit trend, its reason and what steps to be taken for better sales
performance.
It gives information about
    sales territories (having strong / weak demand),
    products (which product has higher/ lower sale)
    types of customers ( who are bulk/low buyers).


Sales cost analysis
Sales cost analysis is done for controlling the various sales costs and is also known as “distribution cost
analysis”.
It undertakes the analysis of sales volume as well as sales expenses in order to find out profitability of the
various activities of sales operations.
Steps in doing sales cost analysis
Sales volume analysis
(dividing the sales volume into different categories such as sales territories, sales persons, types of
customers, channels of distribution, size of orders and so on)
Cost of each sales categories
(product/ territory wise)
Planning the sales effort : sales control & cost analysis
Sales cost analysis is done to determine the strengths and weaknesses of the sales organization which in
turn helps to find out ways and means to improve the profitability in future.



Cost analysis: Procedures
       Classifying selling expenses
       Converting accounting expense data to activity expense group
       Bases for allocating common expenses
       Contribution margin

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5.1 sales control & cost analysis notes

  • 1. Planning the sales effort : sales control & cost analysis ‘ Sales controls : Objectives, process & difficulties  To ensure the achievement of sales and profit objectives  sales people sometimes pay inadequate attention as they are caught up in the maze of everyday activities - many related to individual sales personnel & customer problems – they neglect long term perspectives  To find out strengths and weaknesses, opportunities and threats to the organization.  To locate the defects and take corrective steps to improve the situation  by coordinating and controlling effectively various sales operations  Control process : Sales Audit, Sales Analysis & Cost analysis What is a sales control & cost analysis ? Sales control and cost analysis is the function of the sales management of the company to ensure the achievement of sales and profit objectives by coordinating and controlling effectively various sales operations. The sales control and cost analysis tools are : Sales audit Sales analysis & Cost analysis These tools provide means to a sales management to find out strengths and weaknesses, opportunities and threats to the organization. By using the above different tools of control, the management can locate the defects and take corrective steps to remove the shortcomings and improve the situation and tone up the functioning of his department. Sales audit Sales audit is defined as “ a systematic, critical and unbiased review and appraisal of the basic objectives and policies of the selling function and of the organization, methods, procedures and personnel employed to implement those policies and achieve those objectives”. The main purpose of the sales audit is to find out the opportunities for improving the effectiveness of the sales organization. It also brings out strengths and weaknesses of the individual sales personnel, which allows the management to take steps to improve their functioning. There is no standard methods of sales audit. Normally, a sales audit examines six main aspects of a sales organization. They are Objectives (clearly set the objectives. For example if the co is already commanding 15% market share, then the objective is to increase the share by 10% next year) Policies
  • 2. Planning the sales effort : sales control & cost analysis ( After setting the objectives the organization laid down the policies for achieving the objectives. Policies, both express and implied should be clear and consistent with the objectives. For example should the management follow a policy of promoting persons within the organization or should it hire from outside.) Organisation (with respect to the structure of the organization, whether the organization has the facilities and capabilities to achieve the sales objectives. For example, if overstaffed, it may achieve objectives but profit may fail. If there is a complement of inefficient personnel, then it may fail I its achievement) Methods (Management should devise and adopt proper methods and measures to implement the stated policies and strategies) Procedures & (Procedures should be clearly laid down. It should explain how to implement the policy to achieve the stated objectives. It should clearly assign the responsibility to specified persons who should be accountable for implementation) Personnel (All sales Personnel are subjectively evaluated as to their ability, efficiency and effectiveness in achieving pre-determined objectives, policies and other aspects of sales operations) Sales analysis Sales analysis involves a systematic in-depth study of sales volume operations to find out strengths, weaknesses, opportunities and threats. It tries to find out the sales and profit trend, its reason and what steps to be taken for better sales performance. It gives information about sales territories (having strong / weak demand), products (which product has higher/ lower sale) types of customers ( who are bulk/low buyers). Sales cost analysis Sales cost analysis is done for controlling the various sales costs and is also known as “distribution cost analysis”. It undertakes the analysis of sales volume as well as sales expenses in order to find out profitability of the various activities of sales operations. Steps in doing sales cost analysis Sales volume analysis (dividing the sales volume into different categories such as sales territories, sales persons, types of customers, channels of distribution, size of orders and so on) Cost of each sales categories (product/ territory wise)
  • 3. Planning the sales effort : sales control & cost analysis Sales cost analysis is done to determine the strengths and weaknesses of the sales organization which in turn helps to find out ways and means to improve the profitability in future. Cost analysis: Procedures  Classifying selling expenses  Converting accounting expense data to activity expense group  Bases for allocating common expenses  Contribution margin