You’re sitting at your desk, reading an email from a colleague in the finance department: “We can’t approve the discount on the deal you’re trying to close. It’s too high and makes the deal margin too thin. Sorry. You’re going to have to backtrack on this one.” Frustrating, right?
Meanwhile, that colleague is over at her desk, muttering to herself, “Why did he think that discount would be cleared? The point of sales is to make money, not lose it! At the price he’s requesting, this deal is not worth it.”
This happens all the time. All the time.
A lack of communication and teamwork between the sales and finance departments creates major frustration. Even worse, it makesg it very difficult for your company to increase profitability.
Unfortunately, many teams tend to work in silos. They have their own goals to achieve, their own performance to asses, and their own needs to address.
As each team’s goals get more concrete and data-related, it also seems like their objectives don’t line up and sometimes even contradict the other’s.
And no two teams butt heads quite like the constantly-at-war sales and finance teams.
Sales professionals often see finance professionals as obstacles to the close. Finance teams see sales reps as loose cannons willing to do whatever it takes to close a deal. The finance team writes the rules; the sales team breaks them. And so on.
These attitudes, unfortunately, are extremely counter-intuitive to business success. The main goal is always company success through increased profitability. Each team should want the revenue stream to improve and grow.
The finance and sales teams should be working closer than ever.
Finance professionals are typically the data experts. Sales professionals are the people experts. If you’re going to increase profitability, you need both teams’ strengths and capabilities. You need both the guidelines and the risk-takers to make money.
Some initiatives particularly need both teams working in tandem. Here are three big strategies requiring teamwork and cooperation from the finance and sales departments:
1. Improving the Customer Experience
Strong customer relationships are key to business success. Happy, loyal customers drive dependable revenue. The more happy customers you have, the fewer resources you have to dedicate to finding new ones following churn. Your company can increase profitability in a sustainable way with less time and energy.
This responsibility of building strong relationships with customers typically falls to the sales and account management teams. They log hours of time on the phone and in person with their customers. They know what buyers want and what they value.
So where does the finance team come in?
As part of the finance department, pricing professionals have a wealth of data on their side. They know how to capture value propositions with pricing, an element crucial to increasing profitability. Everything the customer cares about should be accounted for in pricing, and sales and finance have to work together to achieve that goal.
Sometimes, financial analysts even have insights on subtle value propositions that sales reps aren’t selling on but customers want. Customer data reveals these opportunities, but it takes an analyst’s eye to find it. Sales teams can then focus on emphasizing these value propositions during calls with existing customers and prospects.
The data-oriented finance team also can easily see which customer accounts are in the process of churning. And churn is a big deal. According to Bain, even top brands can experience churn rates of nearly 50%. Finance can provide a list of these struggling customer accounts to the sales team. The customer professionals can then do what they do best to reel them back in and transform them into loyal customers.
2. Pricing for Maximum Profitability
The sales team also has unique intuition into what closes a deal. They understand what finally convinces customers to sign on the dotted line, and they manipulate this knowledge with an impressive finesse.
The finance team is there to rein them in and keep deals profitable. This obviously creates a game of tug of war between the two teams – sales is trying to drive win rates, while pricing struggles to avoid margin leaks.
However, when both teams are able to work together on agreed-upon goals, companies have a huge advantage. They can more easily reach the company’s profit potential. These outlined objectives include agreeing on discount ceilings, a final invoice price within 7% of target price, and more.
Data-savvy finance teams can also support the sales team by building a list of customers prioritized by profitability. Sales reps can use this list to dedicate more resources to these higher margin customers and drive more revenue for the company.
On the flip side, sales teams can clue finance teams into value propositions that may be a huge deal for customers but are flying under the radar with analysts. By increasing prices to recoup this value, your company can sustainably increase profitability over time.
3. Annual Forecasting and Budget Planning
During the annual planning process, most teams work separately. Yes, company executives sit down together once or twice to discuss things, but they’re focused on cluing the rest of the team in, not collaboration. The VP of Sales shares his or her team’s quota goals for the next year; the CFO shares his or her profitability goals.
But what if they don’t match up? (They often don’t.) If they aren’t aligned, neither can possibly achieve their objectives.
Instead, both teams should work together when planning for the year ahead. Sales and finance executives should set a mutually attainable goal for the next year’s profits and then work backward from that, setting achievable objectives for each team in order to meet the overall profit target.
Finance can brainstorm cost management and pricing strategies. Sales can work on driving new business and growing customer accounts. Each team has its own goals, but all of these individual objectives should be aligned for a greater goal to increase profitability.
This teamwork is crucial to the budgeting process as well. When developing annual budgets, the sales team needs support from the finance team to gain tools and resources. Analysts can also help them understand how to get the most out of their investments to get a respectable ROI at the end of the year.
In turn, the sales team needs to push the finance team to take risks. There’s no reward without a little risk, and the innovative (and slightly maverick) attitude of the sales team is the perfect catalyst. Sales reps can and should help finance professionals feel comfortable with experimenting with their strategies.
Increase Profitability with Better Teamwork
To start driving a stronger partnership between the sales and finance teams, start small, in the trenches of the company. We recommend creating a buddy system ─ have a sales rep work closely with a finance professional. Put their desks together so they can see what one another experiences on a daily basis. Allow them to be one chair swivel away from answers to their question. Proximity inevitably leads to collaboration.
They should also share data. Focus on inter-departmental cooperation, not competition. Aim to be being accountable as a team. Finance data should be a resource for the sales team and vice versa.
Of course, you’ll need technology you need to help support this mission. Sales and finance data should be all on one system where it can be shared and analyzed. Are you looking for the perfect solution? KiniMetrix, an advanced cloud-based analytics application, helps sales and finance teams understand their sales transaction data for better pricing strategies, higher win rates, and improved margins.
See how it works by watching a video demo today.