Sales Performance Management 101 for Finance: Know the Cost of Your Investment in Sales
January 02, 2018
In this six-part blog series OpenSymmetry and IBM outline the impact of Sales Performance Management Technology on each area of the business including Sales, HR, Finance and Executive Management. In this third post, we discuss how SPM affects Finance, providing visibility on cost of sales and return on investment in sales. Join us as we continue our journey to discovering how SPM covers sales best practices for people, process, and technology.
Finance departments face several challenges when looking at sales performance management. The main issue is a lack of visibility which leads to an unknown total cost of sales and lower ROI than expected from sales compensation. The sales team produces a large body of disparate information which needs to be collected, converted into a suitable format and analysed to build out forecasts and leverage incentive compensation for peak sales performance. Without a robust system in place that can connect finance and sales, this can be extremely time-consuming with little control and little yield.
Lack of visibility not only leads to poor results from incentive compensation initiatives, but it could cause future financial and legal issues if payments are inaccurate. Payment errors that run between 3-8% of total sales compensation will impact profit if errors are causing overpayments, or they could cause legal and compliance issues causing underpayments. There have been examples of underpayments from major organisations to external channels in the press leading to bad publicity as well as legal issues; this also negatively impacts the trust of channel partners in competitive marketplaces. With so many variables to manage, such as adjustments to sale prices, upselling, package discounts, bonuses and commissions, managing sales compensation and assuring accuracy in the manual process is near on impossible.
Sales Performance Management (SPM) solutions helps organisations to avoid these issues by automation of the process; all the information about sales records, commissions, bonuses and payments is automated and centralised, keeping everything in a consistent format and minimising the possibility for human error. With high visibility, all sales costs can be monitored and ROI of sales compensation initiatives can be measured. SPM provides a single view of the data, enpowering managers to easily check the latest figures and discuss with management or colleagues from other departments, because everyone has access to the same real-time information in the same system. This reduces the need for email and excel and increases the response time on requests for business-critical information to support key decisions. All activity relating to costs of sales including commissionable sales events, measures, payments and adjustments are tracked and fully auditable within a robust SPM system.
Detailed reporting on the relationship between sales performance and pay allows finance executives to keep pace with commissions and other variables. Most Sales Performance Management solutions will provide modelling capability allowing finance professionals to assess the impact of new plans or changes to plans and to forecast for best and worst-case scenarios for the new financial year. Well-run SPM systems have been shown to improve company revenues and attainment of sales targets, with best in class organisations using SPM technology realising 7% more sales reps meeting their quotas. SPM systems are constantly evolving with more advanced modelling capabilities, advanced reporting and analytics, and predictable analytics, such as the IBM Incentive Compensation Management integration with Watson Analytics.
As one of the forerunners in sales performance management implementation and optimisation, OpenSymmetry can help navigate the complex array of software providers and strategic SPM options. With experience helping hundreds of companies optimise their sales performance and minimise costs with tailored solutions, OpenSymmetry provides sales performance consulting services for end-to-end SPM solutions from leading vendors in the industry.
Join Ray Wells, VP EMEA of OpenSymmetry, and Ryan Fletcher, Sales Performance Management UK Lead of IBM, on our webinar on how finance leaders can make the most of their investment in the sales team by leveraging SPM solutions.