SALES REPRESENTATION ANDREW ZIELINSKI MBA www accrongroup com fengyeschool

SALES REPRESENTATION ANDREW ZIELINSKI, MBA www. accrongroup. com/fengyeschool/

Module 4 Business Mathematics

MODULE 4: BUSINESS MATHEMATICS Review - Objective In 30 hours, convey basic principles of mathematics applied to the daily life of a professional salesperson, including: 1. Review of basic math, using calculators and spreadsheets 2. Typical calculations utilized in sales 3. Typical Sales Forms 4. Budgeting and Sales Forecasting 5. Financial Reporting

MODULE 4: MATHEMATICS FOR SALES Summary of Basic Skills Review About Spreadsheets Estimating Totals Making Change – Addition/Subtraction The Behavior of Decimals in Multiplication and Division Fraction, Decimals, Percentages Pricing – Cost vs Retail Prices. Rebates. Discounting Basic paperwork: sales orders, invoices Calculating total price including sales taxes

MODULE 4: MATHEMATICS FOR SALES Installment Plans (La vente à tempérament) When it comes to selling a product that involves seller financing, the Quebec government’s Consumer Protection laws exist to safeguard consumers against fraudulent seller practices How installments are calculated and why interest is charged The Time Value of Money As time progresses, the cost of goods and services increases mainly because of increasing input costs, the devaluation of money, and everyone wanting to make more money As a result, if you want to purchase something today but do not have enough money, you have three main choices: Don’t buy it today. When you have enough money, buy it then (saving for it) Ask the seller to put it aside and you will pay them little by little. When seller has all the money, they will give you the thing or perform the service (“lay-away”) Ask someone to lend you the money. Bring the money to the seller and pay for your thing or service. Then, make payments to lender until your debt is paid off

MODULE 4: MATHEMATICS FOR SALES Installment Plans (La vente à tempérament) The Time Value of Money (Continued) Why does the lender charge interest? Money has intrinsic value AND relative value Because of its relative value, the interest, in part, offset the lost opportunity of whatever else that money could have been used for instead of lending to you Also, you are a risk. Maybe you will not be able to pay back your loan. What recourse does the lender have? By charging more, the lender reduces his/her length of time their original amount lent takes to get back to them People, in North America, Europe and many parts of the world do not lend money to strangers just for the fun of it. It’s a business, a really, big business of them assuming risks over time so you can live the lifestyle you want. You utilize their money to please yourself… just like living in your house, driving your car, or eating your food. You paid for all this But, mainly, it’s about the decreasing value of money and risk that the lender takes on your behalf

MODULE 4: MATHEMATICS FOR SALES Installment Plans (La vente à tempérament) The Time Value of Money (Continued) How does it work? 4 elements: interest amount interest rate timeframe of the loan amount of Principle Also, there are the amortization rules and conditions of the loan Normally, the amount to be borrowed (the principle) is known The interest is provided by the lender and it sometimes varies due to: time of year, macroeconomic factors, microeconomic factors, your credit rating, etc. Interest can be fixed or variable… or both!

MODULE 4: MATHEMATICS FOR SALES Installment Plans (La vente à tempérament) How does the lender determine the interest rate? Canadian banks base their rates on the Base Rate of the central bank, the Bank of Canada. This bank is the bank that lends money to all the other banks The bank of Canada uses financial indicators (GDP and inflation rate) and comparative pricing of other, similar, financial products on the open market to set the “price at which it rents money to banks” Example of an Installment Plan Payment Calculation Using a financial calculator: Product sold at: $600 Deposit: $125 Monthly Payments: $45 Number of Monthly Payments: 15

MODULE 4: MATHEMATICS FOR SALES Supply and Demand The Principle: Quantity is INVERSELY PROPORTIONAL to Price What it Means: the lower the price, the more people will buy On a graph, it looks like this: Demand Curve Quantity Price

MODULE 4: MATHEMATICS FOR SALES Supply and Demand (Continued) Looks good, but what does it mean? Although people will buy more if you drop the price, maybe there isn’t enough stock left in inventory or the price is falling below production costs Conversely, if you charge too much, you will not sell enough The challenge if to find the EQUILIBRIUM price and quantity Supply Curve Demand Curve 4, 000 Quantity 1, 000 1 10 Price

MODULE 4: MATHEMATICS FOR SALES The Profit Curve The demand curve alone cannot establish pricing for a product or service Looking at the profit curve (the relationship between price and resulting profit from sales) also shows an EQUILIBRIUM POINT 4, 000 Profit ($) 3, 000 2, 000 1 5 10 Price ($)

MODULE 4: MATHEMATICS FOR SALES Therefore, both Supply and Demand the Profit Curve are required to establish adequate pricing that both meets market demand keeps your company in business Understanding Cost and Explaining Profit Let’s look at what happens in a business. The Income Statement is a Financial Report that shows how a business is making and spending money and how much it has left over

MODULE 4: MATHEMATICS FOR SALES Example of an Income Statement Why Profits? 1. Cover costs associated with operating the business 2. Generate a Return on Investment Profit - Simple Calculation • Profit = Selling Price – Cost Price Profit Margin Calculations 1. Based on Cost Price • Profit__ Cost Price 2. Based on Sales Price • Profit__ Sales Price EVERYONE USES #2! (See sample income statement)

MODULE 4: MATHEMATICS FOR SALES Why is targeting a specific Profit Margin percentage important to a sales person? As sales people, we generate the top portion of the Income Statement. All the revenue generated needs to satisfy all the operating expenses AND required Return on Investment in order to ensure the company remains “viable in the market” Investors have choices. They can invest in our company or do something else with that money. Other alternatives could pay them more interest or provide less risk It is our job, as individuals, and as team members, to set the correct sales targets while negotiating reasonable expectations in consideration of market realities

CHAPTER 4: MATHEMATICS FOR SALES Discounts, Rebates and Reductions Discount – Price reduction granted to a customer if they pay in cash or before a pre-determined date. Given at the time of payment Advantage for Customer Advantage for Supplier or Retailer • Savings • Get paid quicker • Use savings to buy more stuff • Build customer loyalty • Build confidence with the retailer or supplier • Motivate customer to buy more • Increase customer liquidity Example Description • 3% Cash • Pay in cash and get a 3% discount. Calculated on before tax sales total • 3/10, n 30 • If purchase is completely paid within 10 days, get a 3% discount • Customer has 30 days to pay in full. After that interest will be charged

CHAPTER 4: MATHEMATICS FOR SALES Interest Charged to Overdue Accounts For customers who don’t pay within the timeframes set up in the payment terms, suppliers can charge monthly interest Suppliers must declare this on the invoice When pro-rating the interest rate, the date of invoicing is NOT counted

CHAPTER 4: MATHEMATICS FOR SALES Discounts, Rebates and Reductions Rebate (Mark-Down) – Price reduction granted to a customer at the time of sale for merchandise that is of lower quality or has a defect. The rebate is determined by the seller and applies to specific merchandise, which has been pre-determined. Below are examples of some reasons why sellers would provide a rebate Description Example • Incomplete item • A dishware set of 2 items is marked down by 15% because a cup and a saucer are missing • Discontinued item • Stoves with coil elements are marked down by 30% during the week that the store is receiving a new line of stoves with glass-top cooking surfaces • Damaged Item • A wall unit is marked down by 40% because it is missing a shelf and there is a small scratch on the side • Obsolete item • A bazaar type store has several mark-downs for clothes that are no longer in style • Perishable item nearing expiration • A drug store marks down certain make-up products because their freshness date is a month away • Used or Returned Item • A store has marked down several accessories (belts, hats, costume jewelry) by 1520% which were returned by customers over the past six months

CHAPTER 4: MATHEMATICS FOR SALES Discounts, Rebates and Reductions Reduction (Mark-Down, also) – Price reduction granted to a customer at the time of sale on the price of a particular item or the total sale. Reasons vary. A few examples can be found, below: Description Example • Volume Discount on individual purchase • Price reduction granted based on quantity purchased of a particular item or total purchase of all items • Volume Discount on Repeat (Regular) Orders • Rebate can be given to a regular customer. Can be for a particular item of total sale • Seasonal Mark. Down • Popular seasonal item can be reduced in price if it is not longer selling as well • Promotional item • Price reduction resulting from a promotion like a sale

CHAPTER 4: MATHEMATICS FOR SALES Double (or Multiple) Discounts As we saw in the examples at the beginning of this section, a discount can be applied on top of a previous discount As a review, here is the process we already discussed: Sale Price – (Sale Price x first discount) = First Discount Price – (First Discount Price x second discount) = Final Discounted Price

NOW, YOU DO IT! Activity 4. 1 Discounting 1. Calculate the following discounts and net prices Sale Price Discount Rate ($) a) $75. 00 10% b) $185. 50 12. 5% c) $435. 25 15% d) $230. 00 14⅔ % e) $3, 426. 18 37. 5% Discounted Price

NOW, YOU DO IT! Activity 4. 1 (Continued) Discounting 2. Calculate the following double discounted prices Sale Price Discount Rate a) 10% and 5% b) $675. 50 20% and 5% c) 3. $90. 00 $1, 000 Discounted Price 20% and 10% An item is priced at $850 to which a double discount of 20% and 7. 5% are applied. Payment terms are 2/10, n 30 and the invoice is paid within 8 days after invoicing. What is the payment amount BEFORE TAXES?

NOW, YOU DO IT! Activity 4. 1 (Continued) Discounting 4. Calculate the following discounts and net payment amount due by customers considering payment terms, invoice date, and payment dates in the table below: Sale Price Payment Terms Date Invoiced Date Paid a) $237. 20 5/10, n 30 April 15 $4, 623. 80 4/10, 2/20, n 30 January 23 February 4 c) $1, 268. 15 2/15, n 30 August 8 August 22 d) $1, 381. 95 2/20, n 60 March 28 April 12 e) $2, 722. 58 1/10, n 30 May 25 Payment Amount Due by Customer April 23 b) Discount ($) June 6 5. You have an invoice dated June 23 rd in the amount of $1, 748. 69. Payment terms are 3/10, 2/20, n 30. The cheque, dated July 4 th, should be written for what amount? (Do not include taxes)

NOW, YOU DO IT! Activity 4. 1 (Continued) 6. Calculate the net amount to be paid on the following invoices (do not include taxes) Invoice 1 Invoice 2 Invoice 3 Invoice 4 Initial Amount $798 $17, 36. 25 $4, 306. 52 $3, 340 Discount (%) 10 and 5% 10 and 10% 17. 5 and 4% 22. 5 and 17. 5% Discount ($) $ $ Net Price $ $ Payment Terms 2/10, n 30 3/7, 2/15, n 30 4/12, n 20 2/10, 1/20, n 30 Invoice Date September 19 October 26 June 18 February 24 Payment Date September 28 November 3 June 29 March 7 Discount amount from terms $ $ Final Payment Amount Due $ $

NOW, YOU DO IT! Activity 4. 1 (Continued) Discounting 7. 8. 9. 10. What was the original price of an item that you purchased for $72 but for which you received a 15% discount? Knowing you received a double discount of 15%, first, then 10% that totaled $94. 25, , what was the original price of the item and what is its final, discounted price? Save all you answers in a file: Assignment 41_First. Name_Last. Name. xlsx and email to me by end of class Print a hard copy and bring to next class