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    Finance for Sales Managers
    Finance for Sales Managers
    Finance for Sales Managers
    Ebook226 pages3 hours

    Finance for Sales Managers

    By Steve Hay

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    About this ebook

    This book provides a wealth of material to enable salespeople to be more familiar with financial concepts and language so they can be fully confident and effective in selling from a financial perspective. It also guides sales managers to master the relevant essentials of finance. This book helps the whole team to build compelling business cases and present their benefits to Finance Directors, VPs and economic buyers. It is based on a winning combination of good research and practical experience, by professionals both in sales and in finance.
    Finance for Sales Managers was written by Steve Hay and Alan McCarthy. The Resource Development Centre (RDC) was founded by Alan in 1987. For the past 25 years across 40 countries plus 26 of the American states, RDC has been helping thousands of sales people to meet their sales target on a regular basis. One of our associates is Steve Hay – an accountant who has excelled in several different sectors of the economy, including Financial Services. Steve's work over the past 30 years has revolved around two main areas: Finance; and Information Technology.
    We are repeatedly asked by our clients to help Sales Teams be more effective in selling from a financial perspective. The most common request is for material that will guide salespeople through the basics of finance and then build on that foundation to deliver more advanced concepts that will help them to communicate with finance professionals and to sell successfully.
    Alan McCarthy is an award winning career salesman, selling at different times for Rank Xerox, Exxon, Dun and Bradstreet, US Lines and ICL. He has managed sales teams and personally sold into Financial Services, Logistics, Automotive, IT and Consultancy Sectors. Alan then brought his experience to others through training, developing and consulting in sales related subjects: Relationship Selling; Negotiating; Target Account Management; and Sales Team Direction. He has conducted over 530 assignments internationally. Alan has a refreshingly realistic style of delivery and his wide range of training material is firmly based on experience to encourage the development of pragmatic skills. His unique experiences in competitive selling strategies for high value sales propositions has resulted in his clients winning hundreds of millions of dollars of business, in highly competitive arenas. Alan excels in his chosen profession and continues to deliver successful programmes to a wide variety of clients including Microsoft, Oracle, BT and Siemens plus a large number of smaller companies in a variety of industries.
    Steve Hay has been an associate of RDC since 1987. He is a commercially oriented Accountant with a proven record of success in risk management and across a variety of projects and roles in finance; banking; governance; audit; and supply chain management. Steve has been successful in both the private and public sectors. His consultancy work in the UK and overseas has benefitted from his track record of driving value creation through continuous improvement and change management – dealing with cultural leadership, development and motivation of teams, and helping many senior managers to build successful careers.
    Finance for Sales Managers successfully blends theory and practice from the distinct disciplines of sales and finance. It delivers a comprehensive guide for professional salespeople who want to know more about finance. It lays a foundation dealing with financial accounts, costing and budgeting - covering profit and loss, balance sheets and cash flow. It develops these themes to explain working capital management; investment appraisal; and how to analyse the financial performance of organisations. It provides guidance on how to help your customers negotiate for the budgets to buy your products and services. It concludes with help on how best to present your value proposition in order to sell successfully to people with a strong financial background.

    LanguageEnglish
    PublisherSteve Hay
    Release dateJun 22, 2012
    ISBN9781476456423
    Finance for Sales Managers
    Author

    Steve Hay

    Steve Hay and Alan McCarthy have collaborated in writing four books to date, based on the extensive training material of the Resource Development Centre (RDC). Alan founded RDC in 1987 and began training, developing and consulting in: Negotiating; Relationship Selling; Target Account Management; and Sales Team Direction. For the past 20 years Alan has focused on training, developing and coaching experienced negotiators and their executives. RDC has conducted over 600 assignments in 40 countries plus 26 of the American states. Steve Hay has been an associate of RDC since 1987. He began his career as a commercially oriented Accountant then developed a proven record of success in risk management and across a variety of projects and roles in banking; governance; audit; and supply chain management. Steve has been successful in both the private and public sectors. His consultancy work in the UK and overseas has benefitted from his track record of driving value creation through continuous improvement and change management – dealing with negotiation, outsourcing, cultural leadership, development and motivation of teams, and helping many senior managers to build successful careers. Our joint projects have mainly been in the following areas: ~ Negotiation Techniques ~ Finance for Sales Managers ~ Proposal Writing ~ Sales Management Audits These projects included negotiation workshops for sellers – and for buyers of specialised services such as Information Technology. We have provided training and development for Sales Managers; improving their skills and self-confidence in Finance and increasing their success in selling to people from a financial background. We have also provided specialist advice and development for Sales Managers in proposal writing; resulting in increased sales by building and communicating compelling business cases and presenting their real benefits to clients. Our consultancy projects included overall reviews of Sales Organisations; using the RDC Sales Audit Blueprint to verify and provide reassurance of best practice – and to highlight areas for improvement, helping to deliver change that assures success in meeting sales targets. Alan McCarthy has a refreshingly realistic style of delivery and his wide range of training material is firmly based on experience to encourage the development of pragmatic skills. His unique style and experiences in high-stake negotiations has resulted in his clie...

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      Book preview

      Finance for Sales Managers - Steve Hay

      Finance for Sales Managers

      By Steve Hay and Alan McCarthy

      Copyright 2012 The Resource Development Centre Ltd

      Smashwords Edition

      First Edition Jul 2012

      Second (Revised) Edition Sep 2014

      This book is available in print at most online retailers

      ISBN: 9781301626564

      License Notes

      This book is licensed for your personal enjoyment only. This book may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return it to Smashwords and purchase your own copy. Thank you for respecting the hard work of the authors.

      Finance for Sales Managers

      Table of Contents

      Finance Fundamentals

      Introduction and Welcome to this Module

      The Evolution of Money

      Planning, Budgeting and Decision-making

      Selling

      The Key Financial Documents

      Introduction to the Profit and Loss Account

      Introduction to the Balance Sheet

      Introduction to the Cash Flow Forecast and Statement

      Income and Receipts are different things

      The Spiral of Money Invested

      The Surplus Spiral

      Example of a Basic Enterprise

      The Simplified Skeleton of Accounts

      Key Financial Terms

      Income

      Expenditure

      Assets

      Liabilities

      Different Types of Costs

      Fixed Costs and Variable Costs

      Contribution Margin and Marginal Costing

      Break-even Analysis

      Standard and Actual Costs

      Sunk Costs

      Opportunity Costs

      In House, Subcontract or Outsource

      What to Consider

      Applying Opportunity Cost

      Other Strategic Factors

      Capital and Revenue Expenditure

      Balance Sheet

      Profit and Loss Account

      The Importance of Revenue Expenditure

      The Importance of Capital Expenditure

      Depreciation

      Straight Line Depreciation

      Reducing Balance Basis

      The Effect of Capitalisation

      Key Accounts – in more Depth

      Profit and Loss Account

      Balance Sheet

      Limited Liability Companies

      Cash Flow Forecast and Statement

      Working Capital Management

      Inventory Management

      Payments to Suppliers

      Faster Debt Collection

      Investment Appraisal

      Cost-Benefit Analysis

      Non-Financial Benefits

      The Benefits of CBA

      Long-Term Financial Decisions

      Return on Capital Employed

      Accounting Rate of Return

      Payback

      Discounted Cash Flow

      Net Present Value

      Internal Rate of Return

      Analysing Financial Performance

      Porter’s Five Forces Model

      Ratio Analysis

      Liquidity Ratios

      Current and Quick Ratios and the Acid Test

      Gearing

      Profitability and Investor Returns

      Return on Capital Employed

      Earnings per Share and Price/Earnings Ratio

      Dividend Yield

      Dividend Cover and Interest Cover

      Financial Key Performance Indicators

      Gross Profit

      Net Profit and Net Profit Growth

      Profitability

      Return on Capital Employed

      Budgeting – Overview

      The Budget Cycle

      Sales Target Assurance Planning

      Linking Budget to Goals and Strategy

      Decide Types of Budget and Periods

      Monitor and Control

      Evaluate the Process

      Different Approaches to Budgeting

      Incremental Budgeting

      Zero Based Budgeting

      Various Types of Budgets

      Help Customers to Negotiate for Budgets

      Link to Strategy

      Cost and Benefits

      Trust and Accuracy

      Personal Contacts

      Monitoring and Tracking Budgets

      Commitment to your Value Proposition

      Variance Analysis

      How Budgets are Monitored

      Creating a Sales Budget

      Establish Assumptions

      Identify Variable Costs and Contribution Margin

      Test Sensitivity of Assumptions and Figures

      Creating a Project Budget

      Based on Project Plans

      Types of Costs and Pricing

      Setting Prices

      Presenting Financial Information

      Presenting your Value Proposition

      Target and Purpose – the Audience

      Be Precise, Accurate and Up to Date

      Prepare a Summary

      Proof Reading, Editing and Timing

      Overall Conclusion

      Glossary of Financial Terms

      About the Authors

      Alan McCarthy

      Steve Hay

      Other titles by Alan McCarthy and Steve Hay

      Finance for Sales Managers

      Introduction and Welcome to this Module

      Welcome to our module on Finance for Sales Managers, created by Steve Hay and Alan McCarthy. The Resource Development Centre was founded by Alan in 1987. For the past 25 years across 40 countries plus 26 of the American states, RDC has been helping thousands of sales people to meet their sales targets on a regular basis.

      One of our associates is Steve Hay – an accountant who has worked in several different sectors of the economy, including Financial Services. Steve’s work over the past 30 years has revolved around two overlapping areas: Finance; and Information Technology.

      We are repeatedly asked by our clients to help Sales Teams be more effective in selling from a financial perspective. The most common request is for a module that will help you to achieve the following outcomes:

      ~ For you to become more familiar with financial concepts and language so you can interact more confidently with people from a strong financial background,

      ~ For you to be confident in selling to financial people,

      ~ For you to be able to build a compelling business case and present its benefits to Vice Presidents/Directors of Finance, Chief Financial Officers and economic buyers,

      ~ For you to understand in advance how the financial people are thinking, so you can ‘press all the right buttons’,

      ~ For Salespeople who are promoted into Sales Management – to be better prepared for the financial dimension of the bigger role and broader contribution to the business now expected of them.

      The Starting Point – What is Money?

      Let’s begin with something that archaeologists believe was happening 5,000 years ago in Mesopotamia. People were making tiny clay models of sheep and bundles of crops – to represent real sheep and crops being traded. These were put into a little clay packet. The outside was scribed to indicate what was inside – who owed the value of the sheep – and who was the beneficiary. Once baked in the sun, this became a tamper–proof packet, or contract. Eventually people gained confidence in this system and realised that they didn’t need to put the tiny models inside, as long as everyone trusted the marks on the outside. People holding clay receipts for goods held in storage found they could trade and transport the receipts in place of the physical goods. In time this evolved into a fully flexible system of money and financial management.

      In modern day Ghana, the local currency is the Cedi – an Ashanti word meaning cowrie shell. Their coin is engraved with this image, which reminds people that the paper money can be trusted because it is based on the traditional ‘real’ money – bags of shells. On the back of the US one dollar bill is written In God we Trust. In the UK, the paper money carries a promise and the signature of the Chief Cashier of the Bank of England. For example, the ten pound note says I promise to pay the bearer on demand, the sum of ten pounds – in other words, a promise that you can exchange your hard earned ten pound note for a 'real' ten pounds. These examples emphasise the point that money is not really worth anything – it’s all about trust.

      Money is a store of value – and a medium of exchange. It avoids the difficulty of a ‘co-incidence of needs’. For example, without a system of money, if you were trying to sell your company’s latest product – the Wheel – your prospect may offer you two goats and five sacks of flour. If you had no need for goats or flour then you would not have a ‘co-incidence of needs’. You would have a hard job bartering with various third parties trying to find somebody who needs goats and flour in exchange for something that you actually need. Just in case this ever happens to you, remember that RDC also offers modules on Negotiation!

      The Evolution of Money and Modern Finance

      A thousand years later than our first example in Mesopotamia, there was an empire which modern archaeologists call the Neo-Sumerian (UR3) – in what today is southern Iraq. The epic of Gilgamesh dates from this period. Among the archaeological finds, there are thousands of clay tablets recording the High Finance and accounting arrangement for commerce and the financial administration of the empire. From these, we see that goods were flowing into and out of the empire from right across the known world – Globalisation is not new – and the salespeople and financial boffins were there, along with the taxman.

      Thousands of years later, Luca Pacioli was born to a modest family in Tuscany around 1445. He became the first lecturer to hold a chair in mathematics at the University of Perugia. One of his pupils was Leonardo da Vinci. Before 1500 he published a book on Mathematics – with one section on Accounting. His system became known as the Venetian method – and it revolutionised economics and business so it could deal with the European Renaissance and a new period of economic expansion and globalisation.

      Today, every organisation aims to use its resources wisely, either to maximise profit or to provide best value. As a result, they need to plan and control their activities and investments. When you come into contact with your clients and with managers in your own organisation, this will most likely include dealing with some financial issues, whether it is helping to build a compelling business case, planning the budgets they need, or understanding financial data in reports. Salespeople who need to make presentations to boards or committees will benefit from knowing some of the key financial concepts so they can present their ideas with confidence. To be fully effective, you need to be familiar with basic financial terms and techniques.

      The Importance of Finance for every Manager

      Some salespeople often avoid financial matters because they think it is too specialist an area, full of technical rules, regulations and jargon. Some people consider finance to be the job of the finance department, not something within their remit. But individual business functions can no longer work in isolation, because they are so interdependent. You don’t need to be an accountant or a numerical wiz to have an awareness of the main aspects of finance. A basic understanding should be sufficient for your everyday work and will help you to be more confident and effective. Fortunately, it doesn’t take much to demystify the financial reports. As long as you learn the principles behind financial information and the conventions with which it is produced, the data will become more meaningful to you.

      Planning and Budgeting

      On a day-to-day basis, planning is really a way of making the best use of resources, such as team skills, knowledge, time and materials. Resources also include how much money there is to spend. As well as organisations asking themselves what they are going to do and when they are going to do it, they need to plan how the task or project will be done. Every business needs to plan the financial means to be able to tackle operations and initiatives. All organisations and teams need budgets. In the best organisations these are an expression in financial terms of the real world plans on which they are based. When they budget they are essentially working out what they need to achieve and allocating their financial resources accordingly. It is the budget that co-ordinates all the various activities in the organisation and ensures alignment towards a common goal.

      If you have made the move from being a Salesperson to becoming a Sales Manager, then you will also need to gain knowledge and experience in certain aspects of financial planning. You are probably familiar with the standard 'GOSPA' sales planning process:

      Goal: A broad indication of the achievement or development that you

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