Sales Quality Analysis, Why This Is Important?

What Is Sales Quality Analysis?

Sales Quality Analysis is important to do. Why? How to do the analysis? That's the topic that will be discussed in this post.

At the end of the period, often the sales department asks the accounting: "how much we sell this month?" Obviously they want to know how much sales are realized, and the other purpose behind this question can vary:

[1]. How many commissions I have this month (maybe this is the most important)
[2]. How much incentive do I get this month (if receiving an incentive + salary)

For this question, of course the answer is very easy, is not it?

Again, the obviously questioned is how much total sales this month. And the answer: you just see the sales ledger, or see the sales account in the income statement.

Usually they will be more satisfied if you want to open a spreadsheet a bit, then count:

For example:

Sales = Rp 100,000,000
Comission = 5% x 100,000,000 = 5,000,000

Then you quickly answer:
"Total sales = Rp 100,000,000 and your commission is Rp 5,000,000 (tax deduction)"

If the commission figure is large, they will be satisfied, but if the commission figure is relatively small, maybe they will ask further: "ehhmm really very little ?, how are the calculations? may not I get a sales printout? "and so on.

Simple commission counting becomes very complicated for her.

Of course, the situation is common to accountants.

Sales Quality Analysis

The illustration above, is a simple schema, and the person who asks is a salesperson.

What if the person who asks is the President Director?

"Euuhem..euuhmm! (trying to set the pressure to sound like a director) "How are our sales this month?".

The president's question is almost identical to a salesperson's question, almost the same. But if you are observant, this question is really very different.

Will you give the same answer (total sales + commissions)? Or just total sales?

If your position is still clerk or a bookkeeper, maybe a simple answer (total sales and commissions) is understandable. But if your position is higher than that and you give the same answer, believe me, maybe in two years, your career will stay in your current position.

What kind of answers do a director's expectation about sales ?

The question is quite clear "How are we selling this month?", Beginning with the word how. not "how many". So the answer is definitely not total sales, but "good / okay / worst".

That is all? certainly not, the answer should be followed by the reason. Or more exactly: how good it is or how worst it is.

Not just the total sales they want to know, but which is far more important than just the numbers (balances) on the account, namely: Sales Quality.

How to measure a sale is it good or not?

The answer is: Quality Of Sales Ratio (QOSR).

How to calculate it? it's somewhat simple:

Example:

Total Sales from 01 to 30 June 2018 = $ 10.000

But the newly received cash is $ 4.000

So .. Quality Of Sales Ration is = 40%

Why cash received is a measuring instrument?

The quality measure of revenue (which in this case is sales) is always "Liquidity Level". Which means, how much sales can be realized into cash. And at once can find out how much potential risk.

What is the risk of a salesperson? Can be billed or not! Good Debt or Bad Debt.

the amount of cash received compared to the total sales is liquidity level. Although it is in the Balance Sheet, the receivables are classified as current assets but not quite liquid compared to cash.

It should be understood that it is very possible from the total sales that still stuck in Account Receivable Account (from the example above $ 6.000 is still an account receivable) can not be billed, or collected in a long period of time until through production turnover. Or collectible but not all.

Note: Especially regarding the analysis of accounts receivable we will discuss in another topic.

Okay, maybe some of you would like to ask: "so what is the good percentage ?, what is the percentage of good QOSR?", The answer: depends:

• [-] How long production turnover?
• [-] How much Net Earning in the same period?

Next time we will discuss an integrated analysis of Income Quality and Sales quality. For now this is enough.

Advancement Sign!

Want to give a more quality answer to the president director? ".

Okay, add this answer with: "Trend analysis".

How?

The trick is easy:

(QOSR Jan + Feb + March + April + May) / 5 compared to QOSR in june 2018.

Increased or decreased?

If it increases, what percentage increase ? if it decreases, what percentage decrease ?.

I do not think I need to explain how to find the percentage increase or decrease, is not it ?

If anyone asks "how much is our sales this month?", Then the answer is total sales ($ blah blah blah). If the question "How is our sales this month" then the answer is Sales Quality Analysis