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Sales & Cost Analysis

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Sales & Cost Analysis

Done for sales control: statistical purpose of sales control: A/cg analysis to determine profitability

Why Sales Control?

1. Measuring Performance: Objective evaluation of sales efforts critical for growth

Some measures: Sales / Quota ratio / Budget ratio, Closes / Calls ratio

2. Identifying problems before they magnify: Inaccurate sales forecasts, low profit margins, low business, inability of Sales Management to maximize revenues to existing customers

3. Identifying sales opportunities

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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 Sales

2. Comparing actual with targets

3. Taking corrective action

Problem in sales control

1. External factors over which sales people have no control

2. Inadequate information

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Sales Analysis

1. Gathering, classifying, comparing and studying sales data

2. Converts row data from various sources into actionable information

3. 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 standards

5. Sales information systems use mathematical and statistical procedures to generate reports; managers have to decide which information to use for what purpose.

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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 :

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Region S. Quota Actuals Diff. Performance Index

Sales/SQ × 100

West

South

North

East

10.25

10.00

9.75

8.75

10.20

10.02

9.73

7.01

-0.05

+0.02

-0.02

-1.74

99.51

100.20

99.79

80.11

1. Sales Analysis by Region

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Sales Rep. S. Quota Sales Diff. Perf. Index

Ravi

Rahul

Rishi

Raj

500.5

300.5

500.25

425.75

475.5

290.5

150.25

400.75

-25

-10

-350

-25

95.00

96.67

30.03

94.12

2. Sales Analysis by Sales Representative

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Product Quota (Rs.) Actual (Rs.) Diff.

Tooth Paste

Soap

Cosmetics

400

300

500

240

180

220

160

120

280

3. Sales Analysis by Product for Rishi

Rishi has problems of motivation, selling skills.

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4. Sales analysis by customer: Company can focus on promising segments

5. Sales analysis by distribution channel: Can help in making elimination decisions regarding channels

6. Sales analysis by units sold: Useful during times of inflation and price changes

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Sales Audit

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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

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Sales Analysis focuses on Results

Cost Analysis looks into costs incurred to produce results.

Profitability Analysis would include Sales Cost and Marketing Costs.

Marketing Cost Analysis analyses sales volume and selling expenses to identify the profitability of sales activities.

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Break Even Analysis

(Unit SP × No. of Units) – (Unit Var Cost × No. of Units)

Less fixed costs = Operating Income = 0

Eq. SP = Rs.30, CP = Rs.21, Fixed Cost = Rs.36,000

(30 – 21) × N – 360000 = 0

or, N = 360000 / 9 = 40,000 (Break Even Point)

Eq. Co. wants operating profit of 1,35,000

(30 – 21) × N – 360000 = 135000

So N = (360000 + 135000) / 9 = 55000

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Return on Assets Management

ICEBERG Principle

Aggregating total sales figures & comparing with past data, wide peals & troughs of performance & causes problems. So analyze in detail.

Management Assets Sales

Sales Profit Net Margin / on Contributi