Question

What factors should management consider when deciding on the method to use for controlling and reimbursing sales reps' expenses? Give some examples of how each factor might influence the decision.

Answer 1

There are different factors that can be considered by the management. The first factor is the sales target to be achieved by the sales representative. If a sales rep. achieve its target, then total reimbursement of expenses will be done as submitted by the sales rep. The second factor is the nature of client or value of sales to be delivered by the sales representative that will decide the method of reimbursements of sale reps. For example, a sales rep. Bringing high value sales, can be reimbursed with the predetermined rate that is made for those who deliver high value sales. But, sales reps. bringing low value sales, will be reimbursed on the basis of actual expenses, with a proof of receipts and bills paid. Hence, value  and type of sales, decide the method of reimbursement plan. The next factor is the geographical region of operation by the sales rep. as each geographical area has different types of expenses. Hence, the slab is set for different geographical areas and accordingly, the reimbursements take place.
Besides, nature of clients served by the sales rep. also decide the method of reimbursements opted by the firm.