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Between You & Me

Tracking your commissions:  

Be honest. Wouldn’t you be thrilled if a benefactor handed you a check for an extra $5,000 or $10,000 or even $30,000? What would you do with it? How would it improve your life? What kind of fun could you have? Think about that.  

What if that same benefactor told you it ‘s as easy as knowing how much money people owe you. Do you think you could listen for a few minutes to bring in that extra dough?

It makes good sense to know how much money people owe you. The companies you represent know exactly how much you owe them for your samples.  Because it makes such good sense they pay a full-time staff to maintain A/R (Accounts Receivable). They operate with uncanny precision, sending out invoices, statements and dunning notices to customers and reps.  

Companies also pay full time people to cover A/P (Accounts Payable) …These are the people who send out your commission statements and checks right on time and with total accuracy. They always know exactly how much they owe you and they pay you the total amount when it is due….   Right? 

Wait! You say they don’t always know how much they owe you? You say they’re wrong most of the time? You say the invoices on the statements don’t always match the ones you have? You have to prove that they dropped an invoice? You have to prove that an “unpaid” invoice was really paid, and that they owe you the commission? You have to prove that you paid for or returned your samples? You say the commission statements are late or sporadic? Really

It’s interesting how the A/P people, who have lunch with the A/R people and work with the same paper work are never really clear when it comes to how much they owe you? Doesn’t it seem strange that commissions owed often becomes a negotiation because of the lack of clarity?

If you track your commissions, you are familiar with the inaccuracies I described and you know how easy it is to spot problems. If you don’t’ track your commissions, chances are good that you are being ripped off financially with every commission statement/check you (don’t) receive. Fortunately, it is fairly easy to keep an eye on your “receivables”, and “earn” tons of money in the process.

Just to show you how important it is… Several years ago my bookkeeper started a simple spreadsheet to track commissions due me. Because my cash flow from another business was sufficient to keep operations solvent and my bookkeeper wasn’t squawking. I assumed (make an ass of u & me ) that commissions from  my suppliers were coming in fine. Late in the spring the bookkeeper asked me if (ABC) company was investing my commissions. When I asked “Why?” he said “Because they have only paid you $900+/- since September, and it looks like they owe you about $20,000!”   

He showed me the Balance Due column on the spread sheet on which he compared invoices, commission statements and income. It took about ½ hour to prepare and an hour a month to maintain but it turned out to be a $30,000 investment.    

I called the Sales Manager of the company and asked him if the company was in trouble he said “No.   Why?”.  When I explained that they owed me a lot of money I hadn’t been paid, he said “No. That can’t be. You’re wrong.”  I faxed the spreadsheet in, and lo and behold they did owe me the money. It seems their computer had “messed up” and dropped out my commissions. They were embarrassed to say the least and paid up after apologetic calls from some of the company officers.  

Can you imagine if we hadn’t been tracking my commissions? Is this happening to you and you don’t know it? Interestingly, a  year later I was negotiating final commissions from the same company and our figures were nearly $4,000 out of agreement. It seems that they had “forgotten” a $32,000 invoice … it wasn’t in the computer. Instead of me owing over $3,000 for samples, they owed me $700.  

We’re talking a lot of money here! $34,000 is more than many people make in a year! I have other personal examples of how commissions tracking got me money the companies would not have paid if I hadn’t seen the “errors” and been able to prove my case. Incidentally, I have been able find thousands more by ferreting out “miscalculations” on the part of all the companies I represented. 

Get the point? Good! 

Fortunately, tracking commissions is a much simpler process than most reps seem to think.

• First, your company absolutely has to send you copies of every invoice on every shipment into your territory. If they can’t do that it is because they don’t want to. They are going to cheat you.
• Second, your company absolutely has to send you a commission statement every month. If they say they can’t do it, it’s because they don’t want to. Again.. they probably intend on cheating you.

How can I be so strong on these points? I ran an import distribution company for 6 years. We had reps everywhere in the U.S. Even our old 1984-distribution software was fully capable of providing invoice copies and monthly commission statements. Anybody who says “Our system can’t do that” is either lying to you or they are so stone age that they won’t last long enough to deliver the products you sell. Get the paperwork..  

Back to tracking your commissions. Once you have established the flow of paperwork from the company, you need to create a standard spread sheet in Lotus, Works for Windows or MS Excel. Ya gotta have one of those if you’re even fogging a mirror.   

If you are not adept at this sort of thing, pay a bookkeeper to create one to track each suppliers’ commissions. The money you put into this will be returned a thousand fold.

Your spread sheet should have a column each for Customer, Invoice #, Date, Invoice Amount, Commission Rate, Commission Earned, Amount Paid, Adjustments and finally, Balance Due.  When you get your invoices, enter them in numerical order to the spreadsheet. 

When the commission statements come in, type in the amount paid against each invoice you are being paid on. A correctly made spreadsheet will keep a running monthly / yearly total of every penny that is owed you. But better yet, you can immediately spot inconsistencies and prove with the numbers they give you, how much they owe you. You’ll be amazed what you find. 

Most reps aren’t big on paperwork; but as you will see in the next Editorial Section installment of “Collecting The Money Owed You”, many companies use devious internal bookkeeping ploys to take advantage of reps’ paperwork-challenged methods. You invest money and time up front to bring their products to market.. isn’t your security worth a little simple vigilance? 

Don’t lose that income. A simple and fun (once you see how easy it is to catch them) spreadsheet program and a couple of hours a month can pay off big and may make the difference between feast and famine. Now, ask yourself; “What could I do with another $5,000 $10,000 or $30,000?

 

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Tips

 

The Six Best Questions to Ask Your Customers

I always say that selling is like an Olympic sport.  Imagine that you were competing in the next Olympic games.  How would you prepare?

Most top athletes would prepare for four years or more for their event.  In sales, it is crucial that we be prepared in much the same way as our Olympic counterparts.

I believe that there are three Olympic events in sales. 

The first event is when you pick up the telephone to call your customer.  I prepare for this event by having a well-developed telephone script.  I have made over 180,000 outbound calls in my career and I still use a basic telephone script.   Why, because I want to be prepared.  Not having a basic telephone script would be akin to coaching in the Super Bowl without a game plan.

The second event is when you are meeting with your customer to learn about their needs.   Here, I prepare by having a list of five or six open ended questions.   I believe that selling success starts with customer needs.  You can sell without needs, but you cannot build lasting customer relationships without first understanding the needs of your customer. 

The final event in the sales process is when you negotiate the close of a contract.  For this event, I also prepare with a list of open-ended questions that I can use to understand the goals and objectives of the other side. 

I am sure that you are aware of the two sisters who were arguing over the one, remaining orange in the house.  Like most negotiators, they decided to split the orange in half.  Had one sister taken the time to ask about the other’s goals in the negotiation, they would have learned that one sister wanted the orange peel for cooking and the other wanted to fruit for eating.   Both sisters wound up with a 50% solution because neither was prepared to negotiate.

The purpose of this article is to suggest some questions that you may want to consider in order to maximize your ability to understand your customer’s needs in the face-to-face sales process.  Remember that selling success starts with the customer’s needs and you cannot be effective in this phase of the sales process without thought and preparation. 

Your Background Question

The first question that I always ask when meeting with my customers and prospects is:

·        What are you doing now in the area of (insert your product or service)? 

This question is designed to either establish or update your understanding of the customer’s business activities as they relate to your product or service.   If it is an account that you are working with or have visited in the past, this is a good question to ask since a number of months may have gone by since your last visit.  If this is an account that you have not worked with before, this is also a good question to ask since it will allow you to begin the information gathering process at this prospect.   This is the question that I use to segue into the business part of my customer meetings.  I use it at the start of every sales call. 

Your Account Penetration Questions

Now that we have an understanding of the customer baseline as it relates to our product or service, I always look for ways to either penetrate the account (if this is a target prospect) or expand my account relationship (if this is an existing customer). 

The next two questions are designed to show you how to either penetrate new accounts or build barriers to entry at existing accounts.

·          Given what you are doing now, are there areas for improvement?

·        What is your future direction?

The reason I ask these two questions is because my goal at a customer/prospect account is to give the account something they need but do not already have.

When you are working with any account, they always have two sets of needs.  First, there is what I call “core needs”.  Core needs are that portion of a customer’s needs that are readily available in the open market.  You could fill the core needs at your customers and so can the competition.  If all you are going to do is fill core needs on the part of the customer, you will find yourself in a commodity position and price will be a large element of your sales process.

What I am trying to accomplish by asking these questions is to fill a “niche need”.  Niche needs are that portion of a customer’s needs that is not readily available in the open market.   It is niche needs that differentiate you in a competitive market, allow you to penetrate new accounts, allow you to build barriers to entry at existing accounts and allow you to charge premium pricing in a competitive market.

A positive answer to either or both of these questions will deliver a niche need to you on the proverbial silver platter.

Your Value Management Question

The fourth question I always ask on a sales call is:

·          What is important to you in a relationship with a company like ours?

I believe that sales is the successful management of customer perceptions about what is important in a relationship.  The first step in managing customer perceptions is to understand their existing perceptions.  This is the goal of your value management question.

This question will tell you whether the customer values a low price, reliable delivery, quality in product or service construction or any of the other variables that can impact a sale.

Your objective at this point in the questioning process is to determine if the customer’s value system aligns with your strengths as an organization.  In effect, you would like to build a bridge between their needs and your strengths.  If you can be successful at this bridge building process, you will likely make the sale.  If you cannot be successful, your competitors will have a greater chance of making the sale.

Your Decision Maker Question

Have you ever tried to close a sale, only to be re-buffed by the customer when they say that they have to take your proposal to the “committee”?  Of course you have.  We all have.

It is very difficult to sell if you do not have all the decision makers at the table.  It is also very hard to negotiate if you do not have all of the decision makers at the table.

You can save yourself a lot of time and effort by asking the customer one simple question:

·          Who else is involved in the decision making process?

In addition to giving you access to the complete decision making process at a customer account, having access to all of the decision makers allows you to add more value into your customer’s sales cycle and allows you to diversify off of the price issue since many of the decision makers at your customer account will not have a pure price focus to their decision making process.

Your Last Question

We have now asked the customer five questions. 

The first question was designed to establish or update our understanding of the customer account as it relates to our product or service.  The second two questions were designed to allow us to implement our core/niche strategy and the fourth question was designed to allow us to understand and manage customer perceptions.  The fifth question made certain that we have access to the complete decision making process at the customer.

The final question I always ask my customers is designed to make certain that I have covered all of my bases.  I conclude my meetings by asking:

·          Is there anything else I need to know (or you would like to tell me) in order to make our relationship as successful as possible?

This question gives the customer one last opportunity to tell us about a need that they have that we have yet to uncover with the line of questioning outlined above.

Preparation is the Key

When I deliver my live seminars, I often see groups debating over the best questions to ask.  While I believe that certain questions are better than others, my goal in writing this article was to make certain that we are all prepared with a strong list of open-ended questions to ask our customers and prospects.  Unfortunately, if we are not prepared with a list of open-ended questions, we will likely default to close-ended questions and not gather the information we need in order to be successful.

The benchmark that I use to test the quality of my sales calls is to have the customer talking about 80% of the time.  Selling success starts with customer needs and we must be like well-prepared Olympic athletes in the information gathering and needs assessment process.

May the new millennium be a Red Hot millennium for you!

Paul S. Goldner is a noted author, entrepreneur and professional speaker. He is the author of Red Hot Cold Call Selling, Prospecting Techniques That Pay Off! (AMACOM, 1995) and Red Hot Customers, How to Get Them, How to Keep Them! (Chandler House Press, 1999). Paul’s company, the Sales & Performance Group, is the developer of REDHOTSALESTV™, a market leading e-Learning application. Paul can be reached at ( 914-232-HOT2(4682), ) 914-232-4845, 8 Paul@REDHOTSALES.COM and WWW.REDHOTSALES.COM.

 

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Under The Rock.

There are hundreds of experts telling sales reps how to make a fortune selling.. but few bother to advise us that we may not get paid.. Many times, hard working reps lay out money and effort bringing supplier’s products to market.. only find that unscrupulous companies are cheating them out of commmissions earned … and further.. that they lost the money invested in the effort. What a waste!!!

Under The Rock offers advice and tips from top experts in the field of commissions collections.. Look for regular updates..

For earlier articles look in our archives.

III

Negotiating the Right Commission Deal

By Stephen Mitchell Sack

Part of
COLLECTING MONEY OWED YOU

by Attorney Stephen Mitchell Sack

which will be presented in its entirety in Homeofficeprofessional.com

Sales reps must be careful to properly define how their commissions are to be earned. This is one of the most important points to be negotiated and reduced to writing before a rep agrees to work for a manufacturer. Serious problems frequently occur because commission arrangements are not clearly spelled out..

Reps in most industries generally earn commissions in one of the following four ways:

1. When orders are solicited and sold by the rep for the company he represents.
2. When solicited orders are accepted by the company.
3. When solicited orders are accepted and shipped by the company.
4. When solicited orders are accepted, shipped and paid for by the customer.

Each of these arrangements has potential pitfalls. The trick is to know how to avoid them. The ideal situation for reps is to receive payment merely by delivering orders to their principals. However, since this arrangemtnt is difficult to negotiate, we will discuss the ramifications of more common practices..

Accepted Orders

Many reps rearn commissions only when their orders are received band are accepted by their principals. Reps prefer this arrangement because they expect to be paid not withstanding the failure of their principal to ship or make timely delivery, or the customer’s pailure to pay for the goods. Unfortunately, it’s not that easy.

If an "accepted order" deal is made, most principals take additoial steps for their won protection. The reason is that when a rep begins to work for a manufacturer, a legal agency relationship is created. This means that the rep (as agent) has the legal authority to bind the manufacturer (as principal). Since a rep is hired to solicit orders, he normally has the power to bind the manufacturer to acceptance of purchase orders.

If this occurs, manufacturers are then legally obligated to accept all orders solicit by the rep. To avoid this most companies unequivocally state in their rep contracts, that they have total control over the acceptance of orders, setting prices and terms of sale. The following clause illustrates this.

"The company agrees to pay Representative as compensation for his services a commission of eight percent on all accepted orders. Any order solicited, tendered, or otherwise obtained by Representative shall be forwarded to the Company for acceptance. Representative shall quote only the prices and terms established by the Company. The Company shall have the option of accepting or rejecting an y orders taken by Representative, and all orders aer subject to the Company’s written acceptance. The Company reserves the absolute right to refuse acceptance.

Many reps who have this kind of arrangement get stuck. All too often they diligently work their territory and submit large orders. Several months later they are shocked when they receive cmmission statements and small checks. Usually it is too late to protest indiscriminate rejections.

There are several ways to avoid such problems. If you have made an "accepted order’ deal with your principal the following steps should be taken:

1. Be wary of arbitrary rejections. If the principal reserves the right to refuse to accept your orders, and if the right of refusal is exercised, don’t automatically agree to it. Many courts state that a rep’s orders cannot be rejected without good cause even if a rep contract says so! The reason is that the law requires principals to act in good faith; the company must have a valid business reason before rejecting your orders.

If an account is going bankrupt, has a poor credit rating, is a notoriously slow payer, or the rep incorrectly quotes prices or delivery dates, this will justify the rejection of a rep’s orders. You have to be able to show that the company rejected your orders merely because it didn’t feel like fulfilling them.

2. Protest indiscriminate rejections immediately. If the company cannot furnish you with valid reasons for the rejection of your orders, protest this decision immediately. The reason is that if you wait too long yo may veiviewed by conduct to have assented to the company’s decision. Send a letter which states that ou don’t approve of this decision. Always save a copy. If you decide to negotiate a settlement or sue your principal, your lawyer will find the letter useful.
   
3. Negotiate for the right to receive prompt written notification informing you of whether or not your orders have been accepted. This is important. It will allow you to keep track of your orders and determine (within a relatively short period) whether it is profitable to continue selling for the company you represent.

Negotiating Point: When the manufacturer sends the customer an acknowledgment of an accepted order, a copy should be sent to you. Better still, when shipment is made after receipt of an order, always request that your principal provide you with a copy of the invoice.

4. Negotiate the right to receive commission automatically if written notice of rejection is not sent. The following typical clause which has been enofrced by the cvourts in the past illustrates this:

Any order will be considered accepted unless the Company notifies the Representative in writin of any orders rejected within 20 days after said orders are sent to the Company. In the event written notice of rejection is not given, the Prepresentative shall be entitled to commissions on all non-rejected orders, whether shipped or not. Commissions shall be paid on the 15^th day of the month following the month for which said order(s) were received by the Company

Of course, a company can always nullify the rep’s advantage by notifuing a rep promptly through the mail that his orders have been rejected. Once this si done, the rep is out of luck. However, many principals forget their contractual responsibilities and / or keep sloppy records. When this occurs the clause can be used to the rep’s advantage.

When negotiating your commission arrangement, tell your principal you require written notification because it is unfair to keep you in the dark regarding the status of your orders. Tell your principal that it’s unfair for you and your associates to spend valuable time and money selling products when the orders can be rejected at a whim.

One additional comment. If the principal is willing to give you credit for non-accepted orders, on which he did not give a rejection notice, but you cant get full commission, try to obtain a specified percentage of your regular commission rate (say 75 % of your normal 8 %) for untimely, rejected orders. If it came to a lawsuit, chances are you and the company would agree to a lesser amount in settlement anyway.

 

Next time. Action strategies regarding acceptance right to reject, returns and off price goods. ed

By permission of:
Stephen Mitchell Sack P.A.
Specialists in Rep - Supplier Relationships
(212) 702-9000

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