How to Eliminate the Age-Old Conflict Between Sales & Accounting
BY Jeff Haden
Salespeople can be cats and accountants dogs... unless you step in and address the issue.
Inter-departmental feuds are, unfortunately, all too common.
Operations can view HR as irritating imposers of arbitrary rules, while HR sees operations as a bunch of cowboys. (I wore my spurs with pride.) Shipping can view scheduling as dreamers out of touch with transportation reality, while scheduling wonders why shipping can't just stop whining and do their jobs.
And sales often sees accounting as a bunch of paper pushers obsessed with making it hard to just get out there and sell, while accounting see sales as overcompensated prima donnas unwilling to follow procedures, turn in paperwork... or even imagine anyone exists but themselves.
Sound familiar? Thought so.
Fortunately, it's possible to overcome the inherent tension between departments like accounting and sales. I talked to Ash Varma, and founder of Varma & Associates and until recently the CFO, COO, and Advisor to the Chairman for an international training and consulting firm. He spoke with me about the conflict between sales and accounting, the perception that sales people are overpaid, and the knowledge gap between the two groups.
Within the first week of a major financial restructuring assignment I could see the conflict between sales and accounting was so bad the two sides were hardly speaking to each other. What made it worse was the fact that, as often is the case, the two groups worked in their own silos.
I immediately called them all together and basically said, "Houston, we have a problem." I told them nothing could be solved until we worked it all out--and, in fact, that no one was leaving the room until we at least reached some level of clarity.
I looked around the room. "Yes, salespeople are sometimes prima donnas," I said. Several salespeople were shocked, but most smiled knowingly.
"But those of you in accounting need to understand what a salesperson typically faces every day: Doors slammed in their faces, no responses to inquiries, endless conversations with clients who say finally say, 'Get with me tomorrow....'"
The accounting employees started to pay more attention. "Think about it this way," I said. "Even though as CFO my job is to manage the bottom line, if there is no top line there isn't anything for the rest of us to do!"
The salespeople started to look smug.
So I turned to them and said, "But once you make the sale, if it isn't properly recorded it can't be billed. And if it can't be billed we can't get paid. And if the details and paperwork aren't accurate, at the very least payment will be held up and the client may even demand a credit."
The accounting staff started to look smug.
And," I said, "If we don't know what our sales are, we can't make smart financial decisions, we can't file reports, our lenders and investors will cut off the flow of money.... In a nutshell, the accounting staff won't have a job, people in operations won't have a job, you won't have a job... none of us will have a job."
No one looked smug. I hated to be so paternalistic, but what I said was the truth.
What I said also made a surprisingly big impact. The culture change, for want of a better way to put it, was remarkable and we went on to beat records for revenues and profits.
All it took was making sure both sides understood the other was just as important and integral to the process.
The Pay Problem
Another issue that often creates conflict between sales and accounting (and nearly every other department): Non-sales employees feel salespeople are paid way too much. (Oftentimes senior executives and even board members feel that way about sales compensation, too.)
My take? If 1) A salesperson really is the person responsible for the account, 2) The sales commission structures are set up properly in terms of incentives, and 3) The account doesn't fall under what many call a "house account" scenario...
... then God bless a highly paid salesperson.
When an outstanding salesperson makes hundreds of thousands in sales commissions on a flat 10% rate, that means the company makes 90% of the full gross amount. Obviously there can be abuses, but if the compensation package is structured wisely, the more the salesperson makes the more the company makes... and everyone wins.
The Knowledge Problem
Now flip it around: Many salespeople don't understand the basics of finance.
I once spoke to an audience of hundreds of salespeople. In the middle of the presentation I decided to explain a little about business finance. I asked if the audience knew how companies are typically valued. I asked if they were familiar with the various OCF and EBITDA calculations that are typically used.
As one of my colleagues later shared, nearly everyone in the auditorium suddenly sat straight in their chairs, pulled out their notebooks, and started scribbling furiously. I was amazed by how eager they were to learn. I walked them through basic finance, revenue and EBITDA/OCF calculations, multiples in the industry and how they were calculated....
It was immensely rewarding, was an absolute joy--and is still to this day one of my very favorite experiences in business.
When you're faced with an inter-departmental feud, here's the best way to fix it: Speak openly and honestly, help everyone understand the larger issues involved, and help every employee side understand what it is like to be in another person's shoes.
When you do, old divisions disappear and new bonds are created, almost overnight.
JEFF HADEN learned much of what he knows about business and technology as he worked his way up in the manufacturing industry. Everything else he picks up from ghostwriting books for some of the smartest leaders he knows in business. @jeff_haden