Sales Management Report: Sales Performance, Budgeting, and Credit

This report provides a detailed analysis of sales management practices, focusing on aspects such as gross profit margin, net profit ratio, and return on capital employed, using Woolworths, Tesco, and Walmart as examples. It explores sales budgeting methods, including percentage, goal and task, competitor-based, and zero-based approaches, with a specific focus on Woolworths' budgeting strategies. The report also examines sales bonus systems, their impact on performance, and various compensation methods. Furthermore, it outlines credit policies, creditworthiness assessment, and monitoring processes, including actions taken in case of non-payment. The report uses various sources to support its findings.

SALES MANAGEMENT
Name of the student:
Name of the university:
Author’s note:

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Table of Contents
Task 1...............................................................................................................................................3
Task 2...............................................................................................................................................5
Task 3.............................................................................................................................................11
Task 4.............................................................................................................................................14
Reference.......................................................................................................................................17
Appendix........................................................................................................................................20

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Task 1
Gross profit margin
Company name Gross profit margin
Woolworths (A) 0.2%
Tesco (A) 0.05%
Walmart (A) 0.3%
From the above table it is found that Woolworths and Walmart have earned
a decent gross profit margin with their valuable contributions and their hard work.
But, for Tesco it has dropped significantly (Kanapickienė & Grundienė,2015).
They could not generate enough revenue through their sales which could have
resulted in a good gross profit margin. Tesco have earned $3018m gross profit.
Net profit ratio
Company name Net profit ratio
Woolworths (B) 38.7%
Tesco (B) 0.9%
Walmart (B) 3.7%

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Fromm the above table it can be seen that Woolworths have earned a decent
net profit through their effective sales strategy. They have generated enough
revenue from their sales which is around $55475m. However, Tesco and Walmart
have failed to earn a decent profit due to lack of their lower revenue generation
problem and high cost involvement during sale processes (Goy & Bhatia, 2016).
Return on capital employed
Company name Return on capital
employed
Woolworths (C) 0.4
Tesco (C) 0.1
Walmart (C) 0.2
Mark up
The main difference in margin and mark up is summed up as the total
margin of sales which is subtracted from the cost of goods sold. On the other hand
mark up is something used by the retailers to increase the cost of the product so
that the selling price of the goods is derived easily. Retailers needs to focus on the
setting of the price otherwise it may back fire and lead to heavy loss. This mark up
pricing is used because it leads to changes in pricing over the margin based pricing.

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This is because the price on which the marked up price is relied upon varies from
time to time and could lead to different prices at different stages of the product
(Wong & Joshi, 2015). Thus it lacks proper pricing methods which could be
charged by the companies to earn a healthy and decent amount of profit. Marked
up price will always be higher than the marginal pricing.
Task 2
The options which are available to make sales budget are described below:
Percentage method
This is the most famous process by which the percentage of sales is involved
according to the sales goal or gross mark up. The goal is set according to
increasing revenue.
Goal and task method
The process is carried on through defining the goal which will enable the
organization to achieve the desired goals (Massey, 2015).
Competitor based
This process is carried based in the competitors of the organization. The plan
is set according to the competitors which might not be fruitful as the company
might not have the same spending pattern like that of the competitors.

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Zero method
The process is carried on keeping the investments that will be made to zero
level as far as possible. This process lacks the promotional process since all the
concerned could not be involved and they cannot kept in track easily.
In Woolworths the process of goal and task budget with bit of competitor
based budgeting is used to prepare the sales budget. This is mainly because
Woolworths have certain goals to fulfill and the market is highly competitive in
nature.
The reason they are using the above mentioned budgeting process are:
- Woolworths have certain goals and mission to fulfill. The budget will help
them to full their desired goals with a stable generation of revenue.
- The budget would help them invest in proper places according to their need
in various places.
- Competitor based budgeting will allow Woolworths to prepare budget
according to their competitor as they have the required fund to cope up with
the level of investments made by their competitors.
The process of preparing budget is discussed below:
Writing down

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The budget process should be written down which will act as a tool for
measurement. This tool will help as checklist to check the progress of the budget in
the future.
Deciding involved persons
It is essential that Woolworths decides who will be involved in preparing the
budget. This will help the staff of the company to prepare the draft for the budget
that is going to be prepared.
Establishing time
Being a big company, Woolworths needs budget for the next year in
advance. So it advisable that the preparation of future budget should be started
earlier.
Listing task
The task for the budget should be listed according to the needs of the
company.
Developing templates
Templates should be developed that will work as a tool for the management
which will help in linking the summary of the budget with relevant facilities that
the budget will provide to Woolworths (Divino et al.,2015).

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The contingencies are:
- Developing the level of contingency in the budget
- Level of risk to be taken in the budget
- Minimizing the risk in the budget
- Making changes in the budget at the last moment with good design of
modifications
- Changing the budget according to the owner
The variances in the budget are:
Variances Causes Plans to mage
variances
Higher
variances
When the volume of
production increases with
increase in sales.
Nothing required
as increased sales
will generate
higher revenue
When the price of raw
materials increases due to
selling prices.
Increase the
selling price of the
products and
reducing other
expenses.

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Difference in timing of
sales and production.
Nothing required.
Lower
variances
When the amount of units
that are sold is very few
and the fixed expenses
have increased.
Increase
promotional
activities with
reduction in fixed
expenses which
could be averted
easily.
When the selling price of
the units are lowered due
to high completion in the
market.
Proper reduction
of the associated
costs or expenses
thereby increasing
the selling price of
the goods per unit.
The ways through which the performance of the budget could be improved
are:
- Keeping the budget and forecast more flexible
- Implementation of rolling forecasts according to the changes made

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- Proper planning of the budget
- Communicating with the budget team on a regular basis
- Involving the entire budget team
- Clarifying the goals to the budget team
- Tracking and including financial deliverables with the budget
The ways through which the information of the budget will be provided are:
- Annual reports will serve a basis of the budget preparation. This report will
highlight the historical financial deliverable. Based on this the upcoming
budget will be prepared.
- Emails and letters will provide the information to the employees in a more
effective ways.
- Newsletters will be distributed to the shareholders describing the contents of
the budget to be prepared (Divino et al.,2015).
The ways through which fraud in budget can be minimized are:
- Conducting independent reviews of the bank statements.
- Clearing the conflicts of interest with the vendors to make the ongoing
business activities more fluent
- Maintaining regular contact with the budget team (Cavander, et al.,2015)

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- Taking updates about the budgeted figures and estimating the future with the
last budget.
- Performing periodic audit of the budgets
- Making reports of the budget and studying them which is being made by the
auditors
Task 3
The reasons why sales bonuses are used are:
- It helps in motivating the sales persons which will enable them to achieve
the desired results as expected by the company.
- Improper bonus to sales person will hamper the company to achieve their
desired goals which will restrict the success of the company. Thus the
performance of the sales person will be very low (Minnema et al.,2017).
- The company can pay the sales persons according to their performance.
Thus it acts as tool for measuring the degree of performance.
- It helps the company to achieve short and long term gains.
- It will build a completion which will increase the performance of the
employees among themselves to reach for good incentives
- The level of conflict among the management and the employees can be
easily solved.

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The above reasons give enough evidences to promote motivation among the
employees. When the employees will be paid for their hard work and performance
they automatically feels belongingness with the organization. They feel that the
needs are being taken a proper care by the management (Balkin et al., 2015).
Different methods of setting bonuses are:
- Adding compensation with the salary with certain hike in percentage which
is the most common type.
- Some company gives salary with incentives which is calculated as per their
base of the salary.
- A commission based salary process is a process where the employee is only
entitled to salary only which will be according to the amount of sales only.
- Territory based plans are divided among a team where team achieves the
desired results.
The current bonus system in Woolworths is salary plus bonus. This is the most
appropriate way they are giving away commission to the employees. The
commission is calculated based on the extra sales as achieved by the sales team.
This is most accurate way. Woolworths have set a target of $AED 6, 00,000 for the
sales team. This team is entitled to receive ¼ of $AED 6, 00,000 if they achieve.
The bonus will be calculated based on this.