Compensating Sales Personell

7/29/2019 Compensating Sales Personell

1/13

Managing expenses of sales personel


2/13

Under this method, a weekly report of theactual expenses is submitted in detail, item-wise, by the salesmen. After the items are

verified by the office, payments are made.Usually, this method is followed for thesalesmen not travelling through regular routesand whose expenses vary from week to week.


3/13

Under this method, a detail of expenditures isnot submitted by the sales force. Only the totaltravelling expenses are reported to the

company. The aggregate amount isautomatically reimbursed by the company onthe presumption that the salesmen have spentthe amount actually claimed.


4/13

Under this method, the organisation clearlystates beforehand the maximum amountswhich can be spent on various items. This

method is based on a rough estimation of thecost of boarding, lodging and other facilities ina sales territory. Consequently, the salesmenare granted a predetermined amount

irrespective of the actual expenses incurred bythem.


5/13

Under this method, the firm lays down themaximum amount which will be paid towardsmeeting the travelling expenses of a salesman

every month. All the expenses reported by thesalesmen within this limit are paid by the firm.If the salesmen spend in excess of themaximum prescribed limit, such expenditures

are not reimbursed.


6/13

Thus, there are several methods of compensation as well astravelling expenses reimbursement plan put into use by theorganization. It is up to the firm to adopt a specific plan ofcompensation to suit its requirements. However, theadoption of a specific plan for an organization is never

permanent.

The changing market condition always dictates the methodof compensation for the sales force. Since the compensationplan is a reward for performance, every care and caution isneeded while adopting a compensation plan for the

organization. A carefully selected compensation plan caninstill satisfaction in the sales force, on the one hand andenable the organization to exercise control over the salesforce, on the other.


7/13

It means the average pay or money earned peryear (or month)It is important to decide levelsof pay for all sales positions decided based on

the following factors Levels of pay for similar positions in the

industry


8/13

salaries

commissions

bonuses

fringe benefits


9/13

100 percent compensation is salary, which is afixed component No concern for salesperformance or salespersons efforts This plan issuitable for sales trainees, missionary salespeople,

and when a company wants to introduce a newproduct or enter a new territory AdvantagesSalespeople get secured income to cover livingexpenses Salespeople willing to perform non-selling activities like payment collection, reportwriting Simple to administer Disadvantages: No financial incentive to salespeople for moreefforts and better performance. Hence, superiorperformance may not be achieved May be aburden for new and loss-making firms


10/13

Advantages Salespeople get secured income tocover living expenses Salespeople willing toperform non-selling activities like payment

collection, report writing Simple to administerDisadvantages No financial incentive tosalespeople for more efforts and betterperformance. Hence, superior performance may

not be achieved May be a burden for new andloss-making firms


11/13

It is opposite of straight-salary plan

Most popular commission base is sales volumeor profitability

Commission rate is a percentage of sales orgross profit

This plan is generally used by real estate,

insurance, and direct-sales (or network marketing)industries


12/13

Combines straight salary & straightcommission plan

Four types of combination plans used by

companies1) Salary plus commission

2) Salary plus bonus

3) Salary plus commission plus bonus4)Commission plus bonus


13/13

Paying bonus is a method that a companyadopts to reward special contribution and as anincentive to superior performance.

Profit Sharing Many experts in the field of salesmanagement disapprove extending profitsharing to salespeople.

For once, companies agree with them. Theremay be an argument in favour of such apayment if no bonus plan is established forexcellence in sales performance.

Documents

Compensating Sales Personell