Can you handle it?

Considering the wider implications of a sales incentive? Can your business handle the growth?

Thats the word of warning sounded by the Incentive Research Foundation. Soaring sales figures from incentive activity can put a strain on the rest of your business processes, creating a snowball effect on other aspects of the business that you should might not have considered:

"Developing an incentive program with a focus on sales growth alone is myopic," says Dr. Gopalakrishna. "Their impact extends well beyond the sales function to other constituents and processes within the organization." A preoccupation with sales growth with no consideration for other business functions can produce a domino effect including: 1) an adverse affect on cash flow, an important business metric; 2) a possible disruption in supplies leading to unforeseen procurement expenditures because of the need to procure additional raw materials, often at short notice, to support higher sales arising from the incentive program; 3) extra shipping costs of ordered merchandise; 4) acquisition of new accounts may involve other subtle aspects such as customer quality. For example, some new accounts may delay paying their bills, causing an increase in accounts receivable which can hurt bottom-line profitability, specifically cash flow and the management of short-term capital; and 5) planning for additional workers (even though it may be temporary) involves considerable expense including the cost of hiring and training new workers."

While the article offers good advice in the need to consider the wider implications of a hike in sales figures, these are nice problems to have, in our opinion.

(Snowball effect image by Flickr user Bikeclimbsail)