Page 133 - Finance for Non-Financial Managers

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Finance for Non-Financial Managers
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when it fits, it’s a great way to build and to measure customer
satisfaction. Once a customer has placed an order, he or she
has an expectation of when it will be fulfilled. The seller has an
obligation to influence that expectation toward alignment with
the company’s capability and then to meet the expectation. As
noted above in the discussion of backlog, if you don’t meet your
customers’ expectations of delivery, you had better be the only
source in town—or your customers will soon be shopping for
other suppliers.
This measurement is usually presented in terms of days
elapsed from the time a company representative receives the
order until the order ships to the customer. As you can see, it
can be adversely affected by a number of functions within the
company—sales, order entry, credit, production, quality control,
and shipping, not to mention the delivery service. The goal of
management is to coordinate all these activities so people work
together toward the mutual objective of satisfying the customer,
rather than to try to avoid blame if the order is late.

Sales per Customer, Sales per Employee, Sales per Square
Foot of Floor Space
Each of these three metrics measures the productivity of the
sales effort, how well a company is spending its sales dollar.
They’re important measures and easy enough to calculate,
although often hard to influence. Each of these is used when
appropriate, based on the sales model. All can be useful in a
retail environment. Some would not be useful outside of a retail
business. Let’s look at each of these briefly.
Sales per customer can be useful when a company finds its
cost to process an order is fixed or at least controllable. In that
case, it can increase profit significantly if it can increase the
average amount a customer buys, because there may be little
or no increase in the costs of making the sale (beyond the actu-
al cost of the merchandise, of course).
Sales per employee is most useful when the department or
company is strongly sales-driven. Retail sales organizations