What Impact Does Your Sales Process Have on Your Financial Statements?
By Michael J Webb
(pdf of this article)
Most companies want to improve their sales results. Like any other productive work, marketing and sales adds value, and that value can be measured. In a manufacturing plant the product is tangible and the value added is visible in the form of inventory. Managers clearly understand the impact of changes in productivity and inventory levels on their financial statements.
This is not the case in marketing and sales. First, the value added in sales is in someone’s head. This doesn’t mean that the value is just a matter of opinion. But it does mean that different techniques must be used to identify and measure it. Second, most people have only a rudimentary understanding of the relationship between the cost of sales activities and a company’s revenue. Essentially, they see sales as responsible for the “top line” and production as responsible for “the bottom line.”
In fact, marketing and sales has far more impact on the bottom line than most managers realize. But heightening this impact in a positive way calls for control and predictability that are missing in most companies. That’s because most companies fail to employ a process approach to understanding their marketing and sales activities.
This paper defines the basic approach for defining, measuring, and improving marketing and sales processes, and uses a case study to illustrate how the activities and results of the sales process impact a company’s financial statements.