Hi, I want to prepare an incentive plan for a Revenue Manager focusing on Sales and Collection. Please help to identify more parameters on which incentives could be based. If I want to include growth in the sale of products with low sales volume, how can I enhance the sale of those products? I have five products, out of which two products have good sales, one has average sales, and two products have almost no sales. I want to boost the sales of all the products.
From India, Delhi
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From India, Delhi
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Dear member,
Selling is easy, but collecting revenue from past sales by the due date is difficult. Therefore, I recommend designing the incentive plan based on the collection.
Suppose A, B, C, D, and E are your products. Let us assume that products A and B sell well, C has average sales, and E has the least sales. Then you have two options:
a) The first option is to keep the sales incentive uniform across all products.
b) The second option is to provide the least incentive for A & B, medium for C, and high for E.
However, recovery by the due date is also crucial. Therefore, regardless of the option you choose, you need to set a revenue collection target in addition. Fix a percentage for eligibility to receive the incentive for revenue collection.
Calculation of Accounts Receivable Turnover Ratio (ARTR)
Not many companies measure this ratio. Please calculate this ratio at the organizational level as it is the most scientific method to measure the success of revenue collection. Subsequently, a separate ARTR can be calculated for each salesperson.
Calculation of Inventory Turnover Ratio (ITR)
Few companies measure this ratio. While the Head of Purchasing is accountable for the raw material (RM) inventory, the Head of Sales is responsible for the finished goods (FG) inventory. However, measuring ITRs separately for RM and FG is recommended, assigning the respective ITR to the Heads of Purchase and Sales.
If the finished goods' inventory accumulates, any profit earned from sales could be nullified. Consider this factor while structuring incentives.
Thanks,
Dinesh Divekar
From India, Bangalore
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8072Selling is easy, but collecting revenue from past sales by the due date is difficult. Therefore, I recommend designing the incentive plan based on the collection.
Suppose A, B, C, D, and E are your products. Let us assume that products A and B sell well, C has average sales, and E has the least sales. Then you have two options:
a) The first option is to keep the sales incentive uniform across all products.
b) The second option is to provide the least incentive for A & B, medium for C, and high for E.
However, recovery by the due date is also crucial. Therefore, regardless of the option you choose, you need to set a revenue collection target in addition. Fix a percentage for eligibility to receive the incentive for revenue collection.
Calculation of Accounts Receivable Turnover Ratio (ARTR)
Not many companies measure this ratio. Please calculate this ratio at the organizational level as it is the most scientific method to measure the success of revenue collection. Subsequently, a separate ARTR can be calculated for each salesperson.
Calculation of Inventory Turnover Ratio (ITR)
Few companies measure this ratio. While the Head of Purchasing is accountable for the raw material (RM) inventory, the Head of Sales is responsible for the finished goods (FG) inventory. However, measuring ITRs separately for RM and FG is recommended, assigning the respective ITR to the Heads of Purchase and Sales.
If the finished goods' inventory accumulates, any profit earned from sales could be nullified. Consider this factor while structuring incentives.
Thanks,
Dinesh Divekar
From India, Bangalore
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