SALES REPRESENTATION
ANDREW ZIELINSKI, MBA
www.accrongroup.com/fengyeschool/
REVIEW HOMEWORK
Activity 4.5.2 (Continued)
Mathematics of Forecasting
6.
Use the following Excel spreadsheet to create the yearly forecast, considering
the following data:
6.
7.
8.
9.
Cost of Goods: 28% of Sales
Fixed Costs: $12,00/month
Variable Costs: 25% of Sales
Payroll: 10% of Sales
MODULE 4: MATHEMATICS FOR SALES
Budget Analysis




All this data compilation is great but what does it all mean?
How to understand what is going on from one reporting period
to another?
As we saw in preceding examples and homework, converting
dollars ($) to percentages(%) makes analyzing easier
Although real dollar amounts are necessary to fully understand
the scale and scope of the results, percentages convey more
quickly both growth and breadth of sales activities
Let’s look at an example:
MODULE 4: MATHEMATICS FOR SALES
GHI inc.
Budget Analysis
Period Ending: March 31, 2014
Forecast
%
Actual
%
$95,000
100.0
$108,000
100.0
Cost of Sales
38,000
40.0
45,360
42.0
Gross Sales
$57,000
60.0
$64,640
58.0
Payroll
9,500
10.0
10,800
10.0
Payroll Taxes
1,000
1.0
1,000
0.9
16,000
16.9
16,000
14.9
Maintenance
4,800
5.0
5,500
5.0
Promotion
9,000
9.5
15,100
14.0
Total Costs
$40,300
42.4
$48,400
44.8
Net Profit
$16,700
17.6
$14,240
13.2
Sales
Rent
(See p112)
MODULE 4: BUSINESS MATHEMATICS
Objective
In 30 hours, convey basic principles of mathematics applied to
the daily life of a professional salesperson, including:
 Review of basic math, using calculators and spreadsheets
 Typical calculations utilized in sales
 Typical Sales Forms
 Budgeting and Sales Forecasting
5. Financial Reporting
MODULE 4: MATHEMATICS FOR SALES
5.
Financial Reporting
Objective

Provide an overview of the main financial reports that
companies utilize to manage their business
How?

Learn about income statement, balance sheet and cash flow
statement and understand how these statements are utilized
to manage a business
MODULE 4: MATHEMATICS FOR SALES
Assets, Liabilities, and Owner’s Equity

Keeping it all in Balance!
Assets = Liabilities + Owner’s Equity
or
Assets – Liabilities = Owner’s Equity


This key formula is the foundation of a company’s Balance Sheet
A balance sheet indicates the value of a business based on the
net of its assets less its liabilities. It shows where, exactly, this
value exists in the business and how active the business is in
terms of its inventory activity, the value of its assets, and how it is
managing its debts
MODULE 4: MATHEMATICS FOR SALES
Assets



Consists of all that the company OWNS, all that has a monetary
value
How easily they can be converted to cash determines if they are
short term or long term asset
Example of a listing of assets:
Short-Term Assets
Long-Term Assets
Deposits
Office Equipment
Investments
Machinery
Customer Accounts
Land
Accounts Receivable
Real Estate
MODULE 4: MATHEMATICS FOR SALES
Liabilities



Consists all that the company OWNS, its debts
Their due dates determine if each liability is short-term or longterm
Examples of a listing of liabilities:
Short-Term Liabilities
Long-Term Liabilities
Suppliers
Salaries Payable
Bank Loans
Taxes Payable
Mortgage
Accounts Payable
MODULE 4: MATHEMATICS FOR SALES
Owner’s Equity
 Alibaba’s IPO
 Where we see the net value of the company
 Owner’s Equity is always = Assets – Liabilities
 Consists of:





Start up investment
Owner’s Loans
Capital Withdrawls
Retained Earnings (Losses)
Earnings from last accounting period
MODULE 4: MATHEMATICS FOR SALES

Example of a
Balance Sheet
MODULE 4: MATHEMATICS FOR MATH
Analysis of Balance Sheet

Variances

Variance analyses to prior periods helps to see progress
between these time periods:
Assets
2013
2014
% Variance
Deposits
$8,200
$10,500
+28.0
Customer Accounts
$16,500
$12,500
-24.2
Inventory
$46,000
$59,000
+28.3
MODULE 4: MATHEMATICS FOR MATH
Analysis of Balance Sheet


Ratios
Ratios are relationships between balance sheet accounts in the same period.
One of the most common such ratios is the Net Working Capital which relates
short-term assets (which represents the company’s liquidity) to short-term
liabilities (which represents quickly settled debt):
Net Working Capital = Short-Term Assets – Short-Term Liabilities



Working Capital Ratio – The ratio is determined by: Short-Term Assets__
Short-Term Liabilities
This ratio identifies the proportion of assets available to pay current debt. The
higher the number, the more solid the business
It can also be used to compare the robustness of one business to another:
MODULE 4: MATHEMATICS FOR SALES

Example:
Business 1
Business 2
$50,000
$10,000
45,000
5,000
Working Capital
5,000
5,000
Working Capital Ratio
1.11
2.0
Short-Term Assets
Short-Term Liabilities
NOW, YOU DO IT!
Activity 4.5.3 (Part 1 of 2)
Basic Elements of a Balance Sheet
What are the two most common forms of the balance sheet equation?
Identify each of the following as (A) asset, (L) liability, or (OE) owner’s
equity:
1.
2.
a.
b.
c.
d.
e.
f.
g.
h.
i.
Deposits
Account Payable
Land
Mortgage
Capital
Retained Earnings
Client Accounts
Suppliers
Investor repayment
MODULE 4: MATHEMATICS FOR SALES
3.
From the data below, build the company’s balance sheet:








Cash on hand is $1,360
Office supplies: $180
Car: $14,000
$3,000 left to pay on car loan
A $225 client invoice still remains unpaid
Equipment: $25,000
A $7,000 loan was taken to purchase more equipment
Information to include on statement (report):
Name: Pro-Management, inc.
Report: On March 31, 20XX
Use the form on following slide to create balance sheet
MODULE 4: MATHEMATICS FOR SALES
MODULE 4: MATHEMATICS FOR SALES
4.
Calculate the Working Capital and Working Ratio for the
following companies:
Short-Term Assets
Short-Term Liabilities
Company A
Company B
Company C
$25,000
$100,000
$80,000
20,000
80,000
40,000
Working Capital
Working Ratio
5.
From your calculations, above, which company has the most
solid financial position? _________________________
MODULE 4: MATHEMATICS FOR SALES
Revenues and Expenses

Stating Income



Revenues, Costs of Sales, Expenses, Breaking Even, Net Income
Why an Income Statement? To pay taxes and to show how you are
managing your business
Why is this Important?




Investors need to know
In the video clip and article, above, we see how revenues and earnings
per share affect investor perception
This article ties retail performance to public confidence and provides
insight into how retails use this information to manage their companies
This article and video show how retailers diversify their product offering
to address market demand and boost sales
MODULE 4: MATHEMATICS FOR SALES
The Income Statement
 Revenues
 All
amounts that represent raw income for the
business
 Example: sales amounts from all cash registers and
cheque payments to the business for product or
service sales
MODULE 4: MATHEMATICS FOR SALES
The Income Statement
 Expenses


Two kinds: Cost of Sales and Operating Expenses
Cost of Sales




These are expenses incurred in the purchase of raw or primary
materials to make or finish the gods that a company sells
Also can include services that enable such finishing or conversion
Can also include costs incurred in the process of selling the
product or service, or making it available for sale
Typically involves the flow of inventory across the company as
follows:
Starting Inventory + Purchases – Ending Inventory = Cost of Goods Sold
MODULE 4: MATHEMATICS FOR SALES

Example
Company A
Inventory – Start: $5,000
Inventory – End: $8,000
Purchases: $10,000
Company B
Inventory – Start: $5,000
Inventory – End: $3,000
Purchases: $10,000
Calculating Cost of Goods Sold:
Starting Inventory
+ Purchases
-Ending Inventory
-Cost of Goods Sold
-Inventory
Company A
$ 5,000
$10,000
$ 8,000
$ 7,000
Company B
$ 5,000
$10,000
$ 3,000
$12,000
Management is Key to Effectively Managing Perception of Sales Effectiveness
MODULE 4: MATHEMATICS FOR SALES
The Income Statement
 Operating Expenses
 All
other expenses incurred
 Expenses incurred in operating the business
including but not limited to: Payroll, Advertising,
Rent, Loan re-payments, Insurance, Utilities, etc.
MODULE 4: MATHEMATICS FOR SALES
Profit and Loss (P&L)


Simple representation of all revenues and expenses with a Net Income
(before taxes) total at the bottom
Example:
NOW, YOU DO IT!
Activity 4.5.3 (Part 2 of 2)
1.
Identifying Balance Sheet and Income Statement Items
For the following items, identify as appearing on (B) balance sheet
or (I) income statement
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
Land
Inventory
Purchases
Payroll
Maintenance
Car
Travel expenses
Rent
Interest Fee
Supplier Accounts
NOW, YOU DO IT!
Activity 4.5.3 (Part 2 of 2)
2.
Identifying Balance Sheet and Income Statement Items
Calculate cost of goods sold for the following businesses,
using the information provided:
Starting
Inventory
Purchases
Ending
Inventory
a) $18,000
$56,000
$16,000
b) $30,000
$150,000
$45,000
c) $26,000
$110,000
$30,000
d) $14,624
$30,165
$790.00
Cost of
Goods Sold
MODULE 4: MATHEMATICS FOR SALES
Breaking Even

The Role of Fixed and Variable Costs



Fixed Costs – Stay relatively the same through an
accounting and production period, like rent. This concept of
‘fixed’ is relative. Fixed cost for one company could be
variable for another
Variable Costs – fluctuate according to sales volume, like
inventory purchases. Expressed in $/unit
Calculating


Where revenue = expenses
Formula:
Fixed Costs____________
Unit Sale Price – Unit Variable Cost
MODULE 4: MATHEMATICS FOR SALES

Example of Break-Even Calculation
Fixed Costs: $4,200/month
Variable Costs: $5/unit
Sale Price: $8/unit
FC____ = $4200____ = $4200_ = 1400 units
USP – UVC
$8-$5/unit
$3/unit
Break-Even Sales Amount = 1400 units x $8/unit = $11,200

What-If Scenarios


Impact on business if brought up unit price to $10?
What if rent went up?
MODULE 4: MATHEMATICS FOR SALES

Impact of Commissions


Commissions are based on a percent (%) of sales
Increase variable costs
Sale Price
$10
X %Commission = Unit Commission
X
15%
=
$1.50
Variable Costs jump from $5 to $6.50
FC____ = ___$5,000__ = $5,000_ = 1429 units
USP – UVC
$10-$6.5/unit $3.50/unit