Month-end, although happens every month, is a judgemental time for any salesperson. Most of the companies are having a culture of month end closing. It is the time which defines the final performance of the month. An interesting fact is that the last week of the month has more than 60% of monthly invoicing. In few cases, it is even 80%-90% of month’s sales.
So, what is so special about the last 3-4 days? Invoicing done in these 3-4days are (much) more than what happens in rest 26-27 days. Is it raising any red flag? Yes, it does, but still, it happens every month.
Stock Order Rush
Be it a project sales or retail sales, if it is B2B then there are stock sales required to boost the month-end figures. Stock sales contribute to 30%-60% of total sales which obviously makes a huge rush in last few days. Stock sales are sometime early invoicing of expected orders and sometimes it is the regular stock filling of the channel partner.
Month End Deals
It is really an unofficial deal on month-end buying. Channel Partners are well aware of the pressure on sales person and this makes them a good negotiator. They are able to get a better deal in last few days. They accumulate their orders for month end to get a better deal.
Poor Sales Planning
If the sales planning is not real then it is poor sales planning. The salesperson might have made the sales plan on paper in the beginning of the month but most of the time is about following protocols only. The failure rate is quite high for such plan. The reason for the failure of this plan is the salesperson itself.
The salesperson takes 1st week very lightly. 2nd and 3rd week are more for business development. It is the last few days only when the salesperson focuses on invoicing. Invoicing, order booking and business development are parallel activities but it is not being followed practically.
For poor sales planning, only front liner cannot be blamed, Managers are also responsible for same. They also need to submit a weekly plan to the management. If front liner will be honest to their plan then that will not be acceptable by the managers. The pressure creates all wrongs.
Managers discuss the plan but somewhere back of their mind they also know the probable future. The discussion uses to be more on order booking.
To get order invoiced, materials should be available in stock. Supply Chain Management persons are well aware of month end pressure and they make the material available at closing. It is a regular practice for them as they don’t have clear order book pattern. It is some sort of order book rush which needs their planning at their own intelligence.
“If we summarise all the reasons then it is very clear that it is about mindset. Sales Persons are mentally prepared for month end pressure, manager behaves so and the channel partner tries to get best of it. With no clear material plan, SCM is just following the previous month and year’s pattern.”
How does it damage?
If SCM has clear idea about material planning, they can make the material available. This will reduce the lead time and bad inventory. This will also increase commitment level of the salesperson in front of the client. But this doesn’t happen.
Putting everything for month end just randomize the material availability which damages every stakeholder’s commitment. It creates a haphazard system.
Discrimination among the channel partners.
The price must be controlled in the market for long-term business. Channel Partners do have competition among themselves. So the Channel, who could manage to get better deal may damage others. The price reduction is not your strategy but your compulsion in these cases and the compulsion damages strategy.
Lowering the company’s profitability
An employee is getting paid to earn for the company. But if they give unnecessary discounts at month end then they are actually killing the margins.
It is only the last few days when a salesperson come to know about the gap in commitment and deliveries. In any case, if you are not able to break deal with any channel partner then you don’t have time to create a back-up. Your commitment to your manager and management fail miserably.
Damaging the market relation
However month end closing happens every month but because of sales pressure, a salesperson damages his/her market relation. They ignore valuable inquiries in these days and ignore small channel partners those cannot provide immediate sales. This damages the reputation of the salesperson.
Pathetic personal life
The sales person have almost no family life in closing days. Although their family gets habitual of this things but this isn’t good for anyone. They not only have time constraints but irritation, over aggression and unidirectional talk damaged the regular communication as well.
How can it be avoided?
No month end deal
Although it is not easy and less effective at front liner end but very useful for long-term business. The channel partners need material throughout the month (if there is demand) and if they find no special deal then they will place a stock order as and when required.
No early invoicing for project order
If you expect some order to be received next month then don’t rush for the invoicing in this month. In place of that put planning of the items required. This will make a healthy system for you, the channel partner and more importantly for SCM. Anyways you will enjoy the invoicing if not this month then next month.
Strictly adhere to the weekly plan
If you are making your plan more seriously and strictly adhere to that plan then it will ease out all the pressure. Trust me it hardly hit one month or maximum two months if you shift from false planning to real planning. But it is really an excellent practice to keep the things week wise.
Proper Material planning
A salesperson (experienced) is really having a good idea of the month’s sales. They also have an idea that which SKU (Stock Keeping Unit) will be sold in what quantity (approximate). Even if you are 70% correct in your planning, you are helping to build a robust mechanism.
Open discussion with Managers
You should be confident enough and transparent to your manager. The planning must be discussed without getting trapped under pressure. Remember, your manager is totally dependent on you and their performance is directly linked to you. You need to perform in a sustainable way.
With everything place properly your transactions will be executed smoothly. You can devote your time to other activities as well. SCM will be supporting you at the best. If you are able to adhere the thing even 70% (100% is ideal and not possible practically), you are successful.
You will earn for the company. The management really cares for this even if they don’t discuss this in front of you.
Improved channel management
Depending on 2-3 big channel partners only for the invoicing is not a sustainable business. With the uniform billing pattern, you will have time to develop new channels and support small channel. You will increase your base which will help you in long run.
Improved Family life
The family is most important and must not be ignored for any odd things. With things at the right place, you will always have work-life balance.
“There are now many companies those are taking this very seriously and developing a mechanism. But ultimately it is the mindset of salesperson which need to be changed.”
Please add in comments if we have missed any point.