Hi, I want to prepare an incentive plan for Revenue Manager and i am focusing on Sales and Collection. Please help to identify more parameters on which incentive could be based. If i want to include growth in sale of products which are getting low sale volume, how can i enhance the sale of those products. I have 5 products out of which 2 products sale is good 1 is average sale and 2 products have no sale almost. I want to push the sale of all the products.
From India, Delhi
From India, Delhi
Dear member,
Selling is easy but collecting revenue from past sales by the due date is difficult. Therefore, I recommend you design the incentive plan based on the collection.
Suppose A, B, C, D and E are your products. Let us suppose that products A and B sell well, the average sale of product C and the product has the least sale. Then you have two options:
a) The first option is to keep uniform the sales incentive across all the products.
b) The second option is to keep the least incentive for A & B, medium for C and high for E.
However, recovery by the due date is also important. Therefore, whatever option you choose, over and above, you need to fix a revenue collection target also. Therefore, fix a percentage for eligibility to get the incentive for the collection of revenue.
Calculation of Accounts Receivable Turnover Ratio (ARTR): - Not many companies measure this ratio. Therefore, please measure this ratio at the organisational level. This is the most scientific method for measuring the success of revenue collection. Later, a separate ARTR can be calculated for each salesperson.
Calculation of Inventory Turnover Ratio (ITR): - Against not many companies measure this ratio. While the head of Purchasing is responsible for the inventory of the raw material (RM), the Head of Sales is responsible for the inventory of the finished goods (FG). However, the former may happen the latter hardly happens. Therefore, measure the ITRs separately for the RM and FG and assign the respective ITR to the Head of Purchase and Head of Sales.
If the inventory of the finished goods is allowed to accumulate, whatever profit earned by the sales gets nullified. Your incentive structure should take into account this factor also.
Thanks,
Dinesh Divekar
From India, Bangalore
7881Selling is easy but collecting revenue from past sales by the due date is difficult. Therefore, I recommend you design the incentive plan based on the collection.
Suppose A, B, C, D and E are your products. Let us suppose that products A and B sell well, the average sale of product C and the product has the least sale. Then you have two options:
a) The first option is to keep uniform the sales incentive across all the products.
b) The second option is to keep the least incentive for A & B, medium for C and high for E.
However, recovery by the due date is also important. Therefore, whatever option you choose, over and above, you need to fix a revenue collection target also. Therefore, fix a percentage for eligibility to get the incentive for the collection of revenue.
Calculation of Accounts Receivable Turnover Ratio (ARTR): - Not many companies measure this ratio. Therefore, please measure this ratio at the organisational level. This is the most scientific method for measuring the success of revenue collection. Later, a separate ARTR can be calculated for each salesperson.
Calculation of Inventory Turnover Ratio (ITR): - Against not many companies measure this ratio. While the head of Purchasing is responsible for the inventory of the raw material (RM), the Head of Sales is responsible for the inventory of the finished goods (FG). However, the former may happen the latter hardly happens. Therefore, measure the ITRs separately for the RM and FG and assign the respective ITR to the Head of Purchase and Head of Sales.
If the inventory of the finished goods is allowed to accumulate, whatever profit earned by the sales gets nullified. Your incentive structure should take into account this factor also.
Thanks,
Dinesh Divekar
From India, Bangalore
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