Sales & cost analysis
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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