Budgeting for Sales Team Members

In this assignment, we will explore the importance of measurement, information scope, format of communication, clarity, key communications, and monitoring sales budget to identify unethical practices or potential fraud. We will also discuss the evaluation of need for a bonus system, choosing bonus options for sales team members, setting bonuses, calculating cost of bonuses, negotiating bonuses with sales team members, evaluating effectiveness of a bonus system, organization policy for credit agreements with customers, approving granting of credit, checking creditworthiness of a customer, and completing a formal agreement with the customer and financial basis for future trading. These topics are crucial in managing sales performance, motivating employees, and ensuring effective communication within an organization.

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FINANCE FOR SALES MANAGERS

Contents
Introduction......................................................................................................................................4
1.1 Calculate gross profit margin.....................................................................................................4
1.2 Calculate net profit ratio............................................................................................................4
1.3 Explain the difference between margin and markup and when each of these are used in
practice.............................................................................................................................................5
1.4 Calculate return on capital employed........................................................................................5
2.1 Identify different methods used for setting budgets..................................................................6
2.2 Explain how to establish information needs and identify information sources for setting a
sales budget......................................................................................................................................6
2.3 Describe the different approaches to effective consultation and negotiation when setting a
sales budget......................................................................................................................................6
2.4 Explain how to develop budget frameworks.............................................................................7
2.5 Explain how to set a contingency plan for variances to a budget..............................................7
3.1 Explain how to use the budget to monitor and control performance against budget parameters
.........................................................................................................................................................8
3.2 Explain how to identify the causes of variances between budget and actual expenditure........8
3.3 Explain how to implement the actions needed to deal with the causes of variances between
budget and actual expenditure.........................................................................................................8
3.4 Explain how to provide information on performance against the sales budget to others in the
organisation......................................................................................................................................9
3.5 Explain how to monitor the sales budget to identify unethical practice or potential fraud.......9
4.1 Explain how to evaluate the need for a bonus system...............................................................9
4.2 Explain how to choose bonus options for sales team members...............................................10
4.3 Explain methods of setting bonuses........................................................................................10
4.4 Explain how to calculate the cost of bonuses..........................................................................10
4.5 Explain how to negotiate bonuses with sales team members..................................................10
4.6 Describe how to evaluate the effectiveness of a bonus system...............................................11
5.1 Explain organisation policy for credit agreements with customers.........................................11
5.2 Explain the process for approving the granting of credit........................................................11
5.3 Explain how to check creditworthiness of a customer............................................................11

5.4 Explain how to complete a formal agreement with the customer and the financial basis for
future trading.................................................................................................................................12
References......................................................................................................................................13

Introduction
Finance is the measurement and adjustment of managing the overall monetary activities
sustained through pertaining accounting preferences by a company. It can be stated that financial
activities are highly important for the organization so as to measure proper accounting
transaction offered by both the sales team and also the production team of an organization. Here
several assessment and evaluation regarding the finance for sale steam has been encapsulated.
1.1 Calculate gross profit margin
Gross profit margin has been considered as the revenue generated from capitalizing cost required
for sales from the total sales achieved by the company. The gross profit margin has been
calculated as the formula:
[(Sales –Cost of Sales) / Sales] * 100
Be the Sales of a company be 50000 GBP
Cost of Sales = 20000 GBP
Therefore Gross Profit = (50000 – 20000) GBP = 30000 GBP
Gross Profit Margin = (Gross Profit / Sales) * 100 = (30000 / 50000) * 100 = 60%
1.2 Calculate net profit ratio
After calculating the gross profit from the estimated cost of sales and total sales made by the
company, total expense borne by the organization due to operations are deducted from the total
gross profit achieved by the firm in that respective period. All the variable cost and the fixed cost
apportioned within the firm are deducted and thus the calculation of the net profit has been
sustained. The formula is:
Net Profit = [Sales Revenue - All costs (direct + indirect)]
Be the Sales of a company be 50000 GBP
Gross profit = 30000 GBP

Cost of expenses = 25000 GBP
Net Profit Margin = [(Gross Profit–Cost of expenses) / Sales] * 100
= [(30000 - 25000) / 50000]* 100 = 10%
1.3 Explain the difference between margin and markup and when each of these are used in
practice
Margin is tem which can be deemed as the indication of profitability pertained through margin
profitability attained by a firm. While, mark up has been referred as the retailing concept where
cost plus pricing techniques has been established in a convenient way after enabling price after
the total sales made by the firm.
Margin percentage = 100% * Net Profit/ Sale Price
If a product has been sold for £24 which has attributed a cost to a retailer £20:
Margin percentage = (24-20)/28 * 100% = 14.28%
Mark up is considered as per the decision taken by the higher official of a firm. If the cost be 20
GBP of a product, then it can be sold at different percentage as marked up price. If it is sold at
20% mark up price, then the selling price will be 20 GBP + 20*20/100 = 24 GBP.
1.4 Calculate return on capital employed
Return on capital employed or ROCE helps to measure the return achieved by a firm after
allocating its resources that are available for generating the return. The ratio between the
operating profit to the capital employed within the firm has been regarded as the return as
percentage.
ROCE % = 100% * (operating profit/capital employed)
Capital employed is considered as the result of subtraction between total assets and current
liability of a firm.

2.1 Identify different methods used for setting budgets
Budget can be easily settled for an organization after determining the sales revenue of the firm. It
can be demonstrated that organizations. Sales forecasting and its methods have been judged as
per the actual values that has to be set lower according to the forecasting abilities pertained by
sales. Pertaining the method it has been judged about the affordability, judgement, percentage
regarding the sales, and also competitive parity with proper objective and tasks. Therefore
determining the sales and their objectives are highly required for the firm in determining the
estimation of the cost required by the firm (Katsikea, 2015).
2.2 Explain how to establish information needs and identify information sources for setting
a sales budget
Proper information in order to set budgets is needed by the organizations. Therefore, it is
important to achieve sales revenues and unit sales in order to forecast each products as well as
services that are included within the budget. Proper determination of sales and their expenses are
needed to be included as per the inculcation achieved in the respective lines of budget. For the
respective time period, it has been observed that the breaking the sales and expenditure per
month have to be emphasized so as to manage the capital intensive perception effectively within
the firm. Sourcing information from different parts can also be judged in order to validate the
revenue and also the target of sales and expenditure costs attained by the firm. Checking the
products effectively from all the operational departments are important enough to meet the
schedules generated.
2.3 Describe the different approaches to effective consultation and negotiation when setting
a sales budget
Setting the sales budget of the company are always important in involving following interactions
that are described underneath on behalf of every organization:
Gathering proper information in order to formulate the sales budget is required. Moreover,
making proper and efficient decision to control the aspects of sales budget is necessary. Proper
management approvals are important for the budget. Communication to align the budget as
power the planning perspectives are also important. Thus the sales budget has been regarded as

the key and vital planning documents through which higher influence on different in gathering
the communication information. There are different number of communications and mechanism
that are required to disposals that are needed to be chosen through the proclaimed tasks that can
be deemed through email. The usage varieties have been kept with proper information that help
in resolving the issues. Difference in opinion or respective conflict regarding the agenda has to
be reconciled (Theodosiou, 2015).
2.4 Explain how to develop budget frameworks
Budget framework has been maintained through a proper structural development in order to
organize the budget information. It has identified the categories of the revenues along with the
expenditure that has organizes the logical to make a quantitative analysis that are easy. The
convenient perspectives regarding the way of developing the budget framework to utilize with a
spreadsheet that are as follows:
Proper automation systems are necessary with different mathematical functions for using the
considerations are entailed. It can be updated with the estimation of the changes that are
revealed. It is useful for a tool to communicate after the budget has been needed. Proper
organizing the data with hierarchical order are necessary.
2.5 Explain how to set a contingency plan for variances to a budget
Variances are considered as the difference in between the intended levels that are forecasted and
actual balance achieved after inducing the sales revenues and expenditure. Positive budgetary
balance will be achieved when the balance of sales revenues exceed actually upon the total
budgeted values. Therefore, it is highly important to maintain correct forecast for the firm.
Negative budget has assumed the aspects of sales revenue shortfall in actual balance than the
total budgeted figure estimated. In order to maintain an effective contingency plan, a definite
budget variance frame work has been administered successfully that have been portrayed below:
It is highly needed to identify the most likely events that will influence the overall budget. The
organization has enabled little control regarding the events that are developing the external
environment of the business. Planning appropriate responses regarding the variance within an
organization to control and spend about the deployment regarding the workforce.

3.1 Explain how to use the budget to monitor and control performance against budget
parameters
Sales budget has been considered as much more critical object in maintaining the planning
perspectives that are set out when the revenues are identified and needed to achieve the targeted
revenues successfully. It is highly important to maintain the sales budgets that are responsible for
coordination that enhances the operational activity and also investment delivery that are needed
to prepare the sales budget. Moreover, monitoring and controlling the performance against the
budget are always needed and regularly reviewed so as to ensure corrective actions that are
needed to be taken as a necessary perception to control the process. After the coordination
procedure has been achieved, different operational perspectives are directly affected by the sales
budget that has empowered the sales department to deploy the resources to close the sales. The
marketing department are required with specified needs that are effective enough to deliver the
activities of promotion on behalf of the firm (Morgan, 2015).
3.2 Explain how to identify the causes of variances between budget and actual expenditure
As per the significance of business operation, it has been achieved that two important causes for
measuring variance in budget expenses are inaccurate methods of forecasting regarding the cost
are necessary. Changes within the respective level regarding the activity are required for closing
the sales excess that what have been budgeted. Important information are needed to be collect for
small irregular and fluctuations observed from the arousing effect of random events within the
business environment are ignored.
3.3 Explain how to implement the actions needed to deal with the causes of variances
between budget and actual expenditure.
The processes through which the expenses variances are outlined are as follows:
Proper identification to consider the extent and also nature regarding the variance are necessary.
Proper evaluation regarding the variance and warrants to maintain corrective actions will have to
be sustained. Apart from this, raising awareness and confirm the reason of variances are
required. Agreements for corrective actions are also needed by setting proper timescales for the

respective action that will take place. Reviewing the status for confirming the respective
variances that are fixed are highly required.
3.4 Explain how to provide information on performance against the sales budget to others
in the organisation
The factors that are considered are as follows:
 Information for budget using current information
 Appropriate measurement for targeting the audience
 Information scope
 Format of communication are needed
 Clarity regarding communication are needed
 Key communications are highly needed
3.5 Explain how to monitor the sales budget to identify unethical practice or potential
fraud
Unethical practices will generate some interventions that are:
Misuse regarding the funds such like the aspects of fiddling expense and their respective claims
Falsely reporting towards the amount of sales to secure overall performances that are related to
pay
Thus monitoring the budget will reveal certain circumstances that are:
Significant variances with no such satisfactory explanation
Anomalies with the comparison factors for different quantities are needed to claim the expenses.
4.1 Explain how to evaluate the need for a bonus system
In considering the effective practice within the firm, it is important to provide bonus as
remuneration to employees. The system of bonus is generally considered as motivational factor
for the sales professionals in order to control the overall mechanism.

4.2 Explain how to choose bonus options for sales team members
It helps in improving the performance of the firm by pertaining motivation towards the sales
team.
It is used to focus upon the sales effort regarding much more profitable and strategic objectives.
It has assisted in retaining much more experienced managers for organizing and attracting newer
talent for the organization (Brooks, 2015).
4.3 Explain methods of setting bonuses
There are numerous options that are available for implementing the system of bonus that are as
follows:
Utilizing single as well as multiple performance measurement
Measurement can be sales revenue or other key performance indicators.
Apart from this, the monetary rewards are considered to be important part of the sales bonus to
achieve the revenue and gross margin.
4.4 Explain how to calculate the cost of bonuses
The calculation of the cost required for providing bonus within a sales budget and its framework
are considered as an integral part for achieving the threshold levels, for achieving the target
levels and also for achieving the stretch levels within the firm. It is highly important for checking
the boundaries that have issued stretch level rewards considering the bonus system through self
financing about which the reward cost has been covered.
4.5 Explain how to negotiate bonuses with sales team members
The negotiation regarding the bonus with the team that are representing the sales division of a
company has needed some interventions that are as follows:
Establishment regarding the performance criteria along with the awarding bonus have been made
ensure to apply them. Proper ensuring perspectives and conditions of the respective bonus

scheme has to be explained as well as understood that has explained the process regarding the
tracking of record through measuring the performance against the plan.
4.6 Describe how to evaluate the effectiveness of a bonus system
Evaluation of an effective system of bonus can be justified through setting objectives that is
designed for improved revenue as well as profitability and also improving the achievement
regarding the key performance indicators.
5.1 Explain organisation policy for credit agreements with customers
The business corporation has needed organization policies to adhere the credit agreements with
customers for maintaining proper balance between achieving the benefits from the business
growth along with the opportunities for granting the credit are ascertained below:
Credits checking as well as approval for the respective prospects are needed
Credit limit regarding the maximum perception for the customer are granted
Additional charges for maintaining credit facilities are required
5.2 Explain the process for approving the granting of credit
The approvals of the credit has been determined the opportunities of B2C transactions and
payment that are often made before the receipts of the respective goods and services are enabled.
Organization that are extending the credit to the respective customers like the credit care
providing agencies has run a credit check as per the matter of policy. B2B transaction has
typically involve payment that is defined as the number of days considered after pertaining the
goods and also services that have been delivered successfully (McLaughlin, 2016).
5.3 Explain how to check creditworthiness of a customer
Credit check is usually creditworthiness for the customers that have gained the references from
the respective bank account to enabled proper trade references for the respective customer. The
credit reports from the specialists organization has to be enabled. Proper evaluation has to make
in order to understand the vague aspects respectively. The aspects regarding the assessment of

liquidity will be emphasized thoroughly so as to measure the liquidity and the quick ratio by
determining the strength of financial balance.
5.4 Explain how to complete a formal agreement with the customer and the financial basis
for future trading
Trade has represented a contract in between the customer for maintaining the advanced
opportunities to avoid misunderstanding among the issues that have been misused by different
parties.
The organization will be supported through financial basis for pertaining future trading and also
invoicing promptly after delivery regarding the product and services. Different process have
been maintained like signing delivery notes and different terms and conditions regarding the
invoices are justified.

References
Katsikea, E., Theodosiou, M., & Morgan, R. E. (2015). Why people quit: Explaining employee
turnover intentions among export sales managers. International Business Review, 24(3), 367-
379.
Brooks, R. (2015). Financial management: core concepts. Pearson.
Rapp, A., Agnihotri, R., & Baker, T. L. (2015). Competitive intelligence collection and use by
sales and service representatives: how managers’ recognition and autonomy moderate individual
performance. Journal of the Academy of Marketing Science, 43(3), 357-374.
Katsikeas, C. S., Auh, S., Spyropoulou, S., & Menguc, B. (2018). Unpacking the Relationship
Between Sales Control and Salesperson Performance: A Regulatory Fit Perspective. Journal of
Marketing.
Song, S., Koo, J. H., & Paik, T. Y. (2015). Financial Determinants of Sales Promotion
Spending.”.
McLaughlin, T. A. (2016). Streetsmart financial basics for nonprofit managers. John Wiley &
Sons.
Frey, C. B., & Osborne, M. A. (2017). The future of employment: how susceptible are jobs to
computerisation?. Technological Forecasting and Social Change, 114, 254-280.