In some respects, sales and finance play opposite sides:
- Sales wants to spend more money to attract new customers, hire additional representatives, and increase sales motivation.
- Finance wants to spend less money to ensure cash flow is healthy, increase financial discipline, and cut costs.
Both roles are equally important, and a proper balance is what makes organizations successful. In some organizations however, the relationship is more of a boxing match, with two departments constantly fighting one another.
It is our belief that technology – automating sales commissions in particular – is the cornerstone of a great relationship between sales and finance. Automation avoids confusion and is perfectly neutral. Let’s take a look at a few things which can affect the relationship between sales and finance, and how automation can help mend a bad relationship.
Sales As a Collection Machine
Finance is ultimately responsible for managing cash flow and for any company’s financial health. However, it doesn’t mean that finance has a right to use the sales team as a debt collection machine. Forcing sales representatives to harass their customers in order to collect payment does not help restore some harmony between sales and finance. To help sales, finance must be willing to provide its own collection resources and let the sales team focus on what they do best – selling.
Taking Time To Explain Quotas
Unless finance takes time to explain the logic used to set new quotas, sales is likely to view them as “arbitrary”. As long as quotas can be met, this is not a major issue. But the day they can’t be met, there will be a lasting impression that finance doesn’t understand what the sales team is going through – or doesn’t understand its ability to sell. To improve the relationship, finance must make special efforts to explain the logic behind financial projections used to set quotas.
Paying Commissions On-Time
Finance has a preference for accuracy and for double-checking everything. In some organizations, payment of commissions can be delayed to ensure no mistakes were made. Also, due to the complexity of some sales commission plans (and lack of automation), incorrect calculations can occur. It’s important for finance to exercise caution, but also understand the real-world impact of delayed payment of commissions. Sales representatives have bills to pay too! Here again, automation is the best way to streamline the process, avoid commission calculation mistakes, and pay commissions on time.
Aligning Sales Incentives with Financial Goals
It’s important for sales to have a reasonable understanding of financial goals. For example, it could be that selling product A (a subscription-based product) is worth more than product B (a non-recurring transaction) to a company – even if the dollar amount is the same. For example, it could be that a recurring purchase increases the company’s valuation more than a one-time purchase. For this reason, sales must take time to understand the underlying assumptions finance makes when designing incentive plans. In return, finance must make efforts towards educating sales about these sometimes complex topics.
Enforcing Commission Plan Rules
Many incentive plans include “gotcha” provisions such as claw backs, recoverable draws, or payout caps. When a representative initiates a dispute related to those, it’s easy for sales leaders to avoid the conversation and redirect the employee to finance. As a result, finance is perceived as the bad cop, and relationships worsen. For this reason, sales leaders must understand sales commission “gotchas” in depth, and be prepared to defend them. This also applies to disputes regarding crediting of deals to representatives. When it comes to commissions, sales leaders must be willing to be enforcers.
Making Forecasting Easier
Consider a sales organization whose hectic internal process makes closing deals unpredictable. Or a sales organization which pays sales commissions every two weeks. Both make it very difficult for finance to forecast future revenue and set quotas correctly. In the first case, finance doesn’t quite know when deals will be closed. In the second case, the short period leads to large fluctuations over time. To help finance, sales must provide some consistency in terms of closing deals and confirming payment. And sales must be willing to consider reasonably long sales commission cycles.
Considering Things In Aggregate
Sales representatives care about details. For example, they do want to make sure they were correctly credited for a certain deal. Finance however mostly deals with numbers in aggregate. To improve the relationship between departments, finance must be willing to investigate and provide details – even if those details don’t matter in aggregate. Finance must understand the emotional involvement many sales representatives experience when it comes to accurate crediting.
The best way to improve the relationship between sales and finance is to deploy automation because it acts as a neutral referee, improves calculation accuracy, and ensures on-time payment. At the same time, both departments must be willing to take ownership of issues, and take time to educate one another on their “why”s.