Salesperson Failure In Smc Tan Tao Limited Company.pdf

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Nguyen Hung Cuong

SALESPERSON FAILURE IN SMC TAN TAO
LIMITED COMPANY

MASTER OF BUSINESS ADMINISTRATION

Ho Chi Minh City – Year 2018


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Nguyen Hung Cuong

SALESPERSON FAILURE IN SMC TAN TAO
LIMITED COMPANY

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: TRAN PHUONG THAO

Ho Chi Minh City – Year 2018


TABLE OF CONTENTS

EXECUTIVE SUMMARY .................................................................................................. 1
1. PROBLEM CONTEXT................................................................................................. 3
1.1

Company background ............................................................................................. 3

1.2

Symptoms of the problem ....................................................................................... 4

2. PROBLEM IDENTIFICATION ................................................................................... 5
2.1

Situation analysis .................................................................................................... 5

2.2

Potential problems .................................................................................................. 9

2.3

Central problem validation ................................................................................... 14

2.3.1

Central problem identification ....................................................................... 14

2.3.2

Central problem definition ............................................................................. 15

2.3.3

The important of the problem ........................................................................ 16

3. CAUSES VALIDATION ............................................................................................ 18
3.1

Lack of Salesforce training programs ................................................................... 19

3.2

Inappropriate criteria for sales performance evaluation ....................................... 20

3.3

Poor skill in debt collection .................................................................................. 21

4. ALTERNATIVE SOLUTIONS .................................................................................. 24
4.1

Redesigning KPIs for salesperson ........................................................................ 24

4.2

Develop training workshops about debt collection process ................................. 27

5. ACTION PLAN ........................................................................................................... 29
6. CONCLUSION ........................................................................................................... 33
7. SUPPORTED INFORMATION ................................................................................. 34

7.1

Summary of methodology conducted ................................................................... 34

7.2

Summary of financial report ................................................................................. 35

7.3

Detail of the Cause and Effect Diagram ............................................................... 36

7.4

Late – invoice payment survey ............................................................................. 38

7.5

The structured interview ....................................................................................... 39

7.5.1

Interview guide .............................................................................................. 39

7.5.2

Summary of transcript.................................................................................... 40

7.5.3

Transcript ....................................................................................................... 41

7.6

The unstructured interview ................................................................................... 47

8. REFERENCES ............................................................................................................ 55


LIST OF FIGURE
Figure 1. SMC Tan Tao structure ........................................................................................ 3
Figure 2. Customer's payment status of SMC Tan Tao in 2016 ......................................... 5
Figure 3. The initial Cause and Effect diagram ................................................................ 13
Figure 4. The final Cause and Effect diagram .................................................................. 23
Figure 5. Model of salesperson performance evaluation. ................................................. 25
Figure 6. KPIs for salesperson of SMC Tan Tao .............................................................. 26
Figure 7. Action plan 1 ...................................................................................................... 30
Figure 8. Action plan 2 ...................................................................................................... 32
Figure 9. Detail of the Cause and Effect diagram ............................................................. 37

LIST OF TABLE
Table 1. Net cash flow from operating activities in recent year .......................................... 4
Table 2. Collection ratios of SMC Tan Tao compared to other competitors in steel
industry .......................................................................................................................... 4
Table 3. Number of day overdue of customer ..................................................................... 6
Table 4. Customer’ reasons for late-invoice payment ......................................................... 7
Table 5. Percentage of customer’ reason for their late-invoices ......................................... 8
Table 6. Cost estimation for training program .................................................................. 33
Table 7. Statement of balance sheet .................................................................................. 35
Table 8. Income statement ................................................................................................. 36

Table 9. Cash flow statement ............................................................................................ 36


EXECUTIVE SUMMARY
In the economy integration nowadays, credit relationships are becoming increasingly
complex. The emergence of debt is a natural factor in business operations, which includes
both bank credit and commercial credit. Debt and debt control need to be evaluated from
both sides of the stakeholders: the credit provider (the creditor) and the borrower (the
borrower). Many businesses are facing high credit risk, in which the risk of bad debt or
late-invoice collection is one of the factors that need to be strictly controlled. Particularly
at SMC Tan Tao Limited Company, the unusual high of average collection period ratio
comparing other competitors in the steel industry, the customer's receivable accounting
for a large proportion of total current assets, the inappropriate credit policies contributes
to the company result: negative operating cash flow in recent two years.
The company has made plans for debt collection and debt management are not effective.
During the time of working in this enterprise, I noticed some problems in the management
of receivables from credit and business activities, especially those directly responsible for
the recovery of debts: salesperson. Therefore, the businesses management need to have a
more accurate overview of the importance of salesperson in collecting debt task and have
specific solutions to improve the efficiency of account receivable management. Therefore,
the businesses management need to have a more accurate overview of the importance of
salesperson in collecting debt task and have specific solutions to improve the efficiency of
account receivable management. Therefore, the company leaders need to have a more
accurate overview of the importance of salesperson in collecting debt task and have
specific solutions to improve the efficiency of account receivable management. Based on
this actual requirements, the "Salesperson failure in SMC Tan Tao Limited Company" is
the subject of master thesis graduation, the aim’s thesis will cover following contents:
- The analysis of negative net cash flow from operating, high average collection period
and late-invoice collection status at SMC Tan Tao through secondary data, survey, and
depth interview with customers and others employees.

- Identify potential problems and central problem of three symptom in company, based on
that content to validate causes of salesperson failure.
1


- Based on the analysis of the internal factors, combined with the environmental factors,
suggest the proposed solutions and action plan for the causes of salesperson failure.

2


1.

PROBLEM CONTEXT

1.1

Company background

SMC Tan Tao Limited Company is the company professional in trading and importing
various types of steel, metal goods, construction materials, interior design materials and
construction equipment of all kinds, mechanical equipment, and frame warehouses,
factories with aluminum structures, steel and stainless steel.
SMC Tan Tao have 80 billion authorized capital with 64 employees located at Lot
33, Trung Tam Street, Tan Tao Industrial Zone, Binh Tan District, Ho Chi Minh City.

Figure 1. SMC Tan Tao structure

3

1.2

Symptoms of the problem
-

Negative net cash flow from operating activities
Table 1. Net Cash Flow from operating activities in recent year
Unit: Million Dong
Cash Flow Statement

Item
Net Cash Flow from operating activities

2016

2015

2014

-18,461

-86,235

-144,155

On SMC Tan Tao’s cash flow statement, the operational cash flow from 2014 to 2016
clearly is negative, this means the company cannot cover operations solely from running
the business. Negative operational cash flow also signify a growing company that is
hiring personnel, or it could signify a collections problem or poor debt structure.

-

High average collection period

Table 2. Collection ratios of SMC Tan Tao compared to other competitors in steel
industry
Item
A/R Turnover Ratio
Ave. Collection Period
A/P Turnover Ratio
Ave. Payment Period

SMC

TLH
2016
11.95
30.55
25.53
14.30

HMC
2016
16.24
22.48
19.56
18.66

2016
20.36

17.93
29.57
12.34

This table show the different time period between Ave. Collection and Payment period of
SMC Tan Tao (SMC), Tien Len (TLH) and Ho Chi Minh City Metal (HMC) Company in
Steel Commercial Industry in Vietnam. As a general rule, the average collection period
should not be longer (1 + 1/3) of average payment period. Comparing ratios of three
companies above, there is a significant higher imbalance between two ratios at SMC than
the other companies when the time to collect money from customers is nearly 15 days
longer than time to pay the suppliers (4 days at TLH and 5 days at HMC). Because the

4


payment term of steel exporter is usually fixed, a longer collection period in this case will
have negatively affect the short-term debt paying ability of the SMC’s business.
-

Late-invoice collection

The issue of high collection period ratio (or late – invoice payment) has been cited as a
major problem facing business, and in the 2016 Debt Management Report of SMC Tan
Tao, the unusually high rate of late payment of commercial debt has found when 67% of
customers by revenue have invoices that pay later than the payment term. The below chart
will show average number of days overdue in 2016:

Customer's payment status of SMC TT in 2016

Timely Payment

Timely Payment
33%

4%
17%

4 - 10 Days Overdue
11 - 20 Days Overdue
21 - 40 Days Overdue

29%
17%

Longer than 40 Days
Overdue

Figure 2. Customer's payment status of SMC TT in 2016
2.

PROBLEM IDENTIFICATION

2.1

Situation analysis

To determine whether or not average collection period (Table 2) results are good, simply
compare average against the credit terms SMC Tan Tao offer their clients. The company
allows their 71 / 108 client credit terms less than 15 days (account for 72.40% of sales
revenue), but the average collection period is 31.03 (Table 2) days, which is troublesome.
The below table will show detail of average number of days overdue in 2016

5


Table 3. Number of day overdue of customer
Unit: Number of customer

In according to the information provided by planning department, only 33% of SMC TT’s
customer have timely payment with their payable account. This ratio, is significant higher
than the average industry ratio, although the day of overdue is the same, usually less than
3 to 4 weeks.
According to Atradius Survey Reveals state that (7) nearly 40% of the value of
B2B invoices in Western Europe paid late. Overdue invoices paid on average within three
weeks of due date. 1 in 4 respondents paid their suppliers late due to B2B customer's late
payment.
Furthermore, we conducted the survey and sent to all customers who have late payment to
find out the reasons which resulted into the symptom “Late invoice collection”. Finally,
we found out and summarized three main reasons that customer usually argued as
following:

6


Table 4. Customer’ reasons for late-invoice payment
Number of
Customer
Feedbacks

Revenue
(MT)

Overdue Clients Quantity

Reason

Group 1: 4 - 10
Days Overdue

19

26.39%

4,028

14.63%

19

They have difficulty in tracking their payables

Group 2: 11 - 20
Days Overdue

31

43.06%

16,671

60.56%

18

They have other critical suppliers. (6 clients)
They are in financial difficulty. (10 clients)
They want to pay in bulk (2 clients)

Group 3: 21 - 40
Days Overdue

18

25.00%

4,285

15.57%

12

They have other critical suppliers. (7 clients)
They are in financial difficulty. (5 clients)

Group 4: > 40
Days Overdue

4

5.56%

2,543

9.24%

4

They are in financial difficulty.

Total

72

27,527

In this table, the sales figure of customer have overdue invoice is 27.527MT accounting
for 62.7% of total sales in SMC TT. So those who found late payment to be the greatest
problem impact on a businesses’ turnover or cash flow. Not only because late-payment by
buyers costs a business have time and money in respected to pursuing collection of debts,
but also because bad debt reserves represent money that is unavailable for use in growing
the business.
Howorth (1) state that the issue of late payment of commercial debt has been cited
as a major problem facing small business and has precipitated much political debate (p.1)

7


Table 5. Percentage of customer’ reason for their late-invoices
Percentage

Revenue
(MT)

14.63%

4028

50.68%

13951

Customers have other
critical suppliers

32.88%

9050

Customers want to pay in
bulk

1.81%

498

100.00%

27527

Reason
Customers have difficulty
in tracking their payables

Customers are in financial
difficulty

Total

1.81%

14.63%

32.88%
50.68%

Customers have difficulty in tracking their payables
Customers are in financial difficulty
Customers have other critical suppliers
Customers want to pay in bulk

The chart show reasons for late payment base on revenue in 2016, customer’ excuses will
continuously explore by asking them more detail including:
-

Customers have difficulty in tracking their payables

This is some customer’s excuses in this case:
 Invoice is late or missing( 10 customers )
 Invoice dispute — after contract agreed ( 5 customers )
 Invoice dispute — with no contract in place ( 4 customers )
-

Customers are in financial difficulty

This is the most popular answer (56.67%) when conducting the survey for the other
groups, they tell their business may be going through tough times and they really are
unable to pay you back on time. The excuses for this can be anything: they may find they
are unable to sustain the level of borrowing they have built up, they haven’t yet received
the payment from their clients or the problems may have come about because of some
unforeseen event…
-

Customers have other critical suppliers

This answer was discovered by the salesman’s experience when they communicate
personally with their customer. Furthermore, 36.67% of customer’ feedbacks have the
same opinion that SMC Tan Tao may not be ranked at the top of their payment priority
list.

8


The reason behind this case is SMC Tan Tao have non-stringent credit criteria. Some
suppliers can claim interest and debt recovery costs if customer is late for paying goods,
the others even have the commission or annual awards for customer who make the
payment on time.
2.2

Potential problems

Moreover, in order to make the study more effective, clearer and convinced, together with
the supporting theories and the most updated analytics from Planning Department of SMC
Tan Tao, 5 in-depth interviews were conducted with four main groups, with details as

below: (the transcript and interview guide are mentioned in section 7.5 and 7.6 of the
thesis)
The first group includes customers who have difficulty in tracking their payables
The second group includes customers who are in financial difficulty
The third group includes customers who have other critical suppliers
The fourth group includes staffs those who currently work in Bill Function, and
salesperson in Sales Function.
The interviews were conducted via mobile phone with customers who have the late
payment at SMC Tan Tao to find out whether the answer in survey is real reason of their
late-invoice and another commentary about the role of salesperson in helping them make
the payment on time and more easily. In the other hand, the interview with staffs will be
happened face-by-face at meeting room in SMC Tan Tao to discover. Semi-structured
interviews were selected to carry out this research study. They allowed the participants to
elaborate and with that provided more flexibility, range and therefore the capacity to elicit
more information from the participant.
After doing the researches, explore the reality and from symptoms listed in situation
analysis, potential problem behind them was investigated including: inappropriate of
credit policy, failure of billing department and salesperson failure

9


-

Inappropriate of credit policy

To discover the reason why customers may find they are unable to sustain the level of
borrowing they have built up. Mr. Thanh, the sales manager reveal the real reason behind
customer’ excuses:
“Client was offered too much credit so they tend to buy more than their ability to

pay. This lead to take a longer time than the payment term in signed – contract.”
The causal factor of this answers is the failure in assessing customer credit line and their
solvency. Credit evaluation is the important process must go through to become eligible
for a debt; however, SMC Tan Tao doesn’t have the specific job which monitors the
financial performance and well-being of customers, or categorized the risky customer
who need the credit insurance to protect company against the failure of customers to pay
trade credit debts. Therefore; salesman and sale manager usually rely on “gut instinct”
when deciding whether to extend credits to customers. This would be dangerous, because
they are most important people while whether the customer credit line will be increased or
not.
Besides, salesperson usually propose a higher credit line for customers to hope they’ll buy
more in the future. If clients have the bigger order, salesman won’t hesitate to deliver
goods to achieve the sales target without considering to the difficulty of debt recovery
later. Mr. Tien, the Director whose company have late –invoice with 20-35 days overdue
said:
“I agree with you in principle, but it is not as simple as it seems. If you want to
have the big deal you have to follow the order carefully. Your salesman know this rule,
without grating credit he can’t get order in bulk like that”
In summary, SMC Tan Tao doesn’t have credit insurance for risky customer and discount
for early payment, those credit policies were inappropriate at the advanced stage
comparing with other competitors and that was a serious misjudgment
-

Failure of billing department

Night customer who responded in Group 1 have the same main reason that they get
trouble in getting their invoices and the payment instructions are unclear. A disorganized
10

accounting department or a lack of headcount that knows how to track and process
payables may cause delayed payments for them. Therefore, clients may not be able to
properly keep a track of their accounts payables, leading to confusions regarding payment
amounts and deadlines. Second, SMC Tan Tao keep sending invoices that have got small
little errors that make a big difference to the overall invoicing process and lead to invoice
dispute. In addition, three approval are require on each invoice is showing an inefficient
invoice processing system, that make invoices fail to reach the client on time and so the
payments get delayed as well
The faster that the billing department generates invoices and sends them to the customer
after a product or service is delivered the sooner payment will be received. As obvious as
this may be, SMC Tan Tao perform such work in batches and it may take them a week or
more to invoice their customers. Ms. Trinh, the billing staff, has the duty that include
combining and processing the vendor invoices into bills or invoices sent to clients said:
“I must pass these bills from the operations department, where the liability was
originally created, to the accounting department, where it must be recorded.
Finally, I show them to the deputy director to confirm the invoice. There are three
approval for each invoice. That is too much!”
Seconds, manual data input in invoices processing is time-consuming and prone to error,
re-keying into multiple systems so it’s easy to misplace and lose paper invoices. When an
invoice arrives with incorrect details, two things are likely to happen: clients will waste
time trying to figure out the details, or push it into the exception folder for later
correction. Either way, payment is delayed.
Paul (2) explained that it has been argued that late payment problems are exacerbated
by the fact that firms, especially small ones, do not send invoices or statements on
time, or in some cases, at all (p.11).
In addition, the salesperson who have more work created in tracking down customer's
payment status as they don’t have time to remind the overdue invoice; or give customers
the payment instruction on document not clearly so customers do not know when the
payments is due. On the other hand, they have too much difficulties to track customer’s
11

payment progress through a system, and processing is fraught with access, retrieval and
storage issues.
-

Salesperson failure

Under SMC Tan Tao payment terms, whenever business' clients pay their invoices late,
late payment interest can be claimed. But the truth is interest on late payment is not
rigorously enforced because of the salesman affair: that’s not the professional way to
encourage clients to pay on time and they will buy no more product at SMC Tan Tao.
Charging fee is taking money the customer could be using to pay on his loan and diverts
that money away from that purpose. It leads to the perception may be that a client who
doesn’t pay on time can repeat this behavior.
One of the roles of the salesperson is collecting bad paying accounts. But in the in-deep
interview with Mr. Tran Van Tung, the salesman, reveal that their time is better spent
selling the product. Every collection call they make is one less sales call that could have
been made and he don’t want to break his close working relationships with customers to
convince them to more quickly retire past due balances. In their opinion, if the bill isn’t
paid, the sale isn’t really made and the customer delay for few days to make the payment
in steel industry is acceptable.
Moreover, SMC Tan Tao also doesn’t have early payment discount, which help customers
to save a significant amount of money. That is the motivation for customer to pay sooner
because the longer company wait to get paid, the more things that can happen that may
prevent the buyer from satisfying its obligation.
Together with the Late – invoice collection literatures & theoretical research and 3 indepth interviews with online survey to different groups of customer. The following causeand-effect map with main contents and reasons has just been created.

12

Figure 3. The Initial Cause and Effect Diagram
13


2.3

Central problem validation

2.3.1 Central problem identification
Base on the initial cause and effect map, three potential problem of SMC Tan Tao are that
they have inappropriate credit policy, failure of billing department and salesperson failure
that lead to the late-invoice collection. However, in this essay only the influence of
salesperson failure on company symptom will be discussed because of the limit of data
and time as well as the complex between different functions in SMC Tan Tao.
While a disorganized billing department or a lack of headcount that knows how to track
and process payables may cause delayed payments for customers, this is relating to the
structure and procedures of company. Therefore, clients may not be able to properly keep
a track of their accounts payables, leading to confusions regarding payment amounts and
deadlines. On the other hand, the discount for early payment and credit insurance which is
offered client are subject to the company credit criteria and long-term orientation of the
board of directors. For example, credit insurance may be beneficial to some but just an
unneeded cost for others depending on company's situation. While early payment discount
can provide good results, it is not for everyone. As a matter of fact, offering quickpayment discounts can have some serious drawbacks, clients could revert to paying in 30
to 60 days without warning. Consequently, company could once again have the same cash
flow problems it were trying to avoid. In addition, because of the limit of data and time as
well as the complex between different functions, only salesperson failure problem will
be chosen is the central problem for three reasons following:
Firstly, salesperson has close relevant and appear in all three factor which is discussed
above will be chosen to investigate. Mr. Thanh, Sales Manager said about the important

of sales team in collection effort of company:
“Sales people communicate with customers more often than accounting employees
so they can act as an extension to the finance department to help collect on past due
invoice. In many cases, the salesman is the best person to involve in collections which
may be held up due to disputes over products they purchased. So if something wrong with
the account receivable, salesman should be primary responsible for that”
14


Moreover, sales force management is also in involved in the debt collection effort because
their close working relationships with customers will convince them to more quickly
retire past due balances.
Rottenberger (3) explained that according to Didier Muller, vice president of Carbone
USA Corp, in New Jersey, there are two essential benefits to this type of setup: “First,
ensures that your credit department won’t call and destroy relationship that the
salesperson has built. Ann second, it motivates the salesperson provide proper followup and a better return on (p.2).
Finally, the other five reasons are closely related to the salesperson's failure to collect the
receivable on time. That are the wrong perception, working-related stress or the
qualification of employee – factors demonstrate that the significant of salesperson failure
is the most considerable problem SMC TT is facing to.
2.3.2 Central problem definition
Defining the salesperson failure term is important to measure the failure of
salesperson performance. But there is very little theory and review have been investigate
the issue of salesperson failure. I am aware of only two studies where salesperson failure
has been defined in major topic.
Ingram (5) defined failure as “the inability of the salesperson to consistently meet
minimum job standards (p.11).
Although this definition provides some guidance, it does not sufficiently define the
domain or dimensionality of salesperson failure construct.
Salesperson failure is measured by the termination (voluntary or otherwise) of the

salesperson or by the failure of the salesperson to reach expected goals or standards
such as quota, forecast, or other measures of productivity (6).
Finally, even within a given company, the definition of failure may be somewhat
situational, depending on the person or territory involved, the state of economy, or any
number of other circumstances.
15


In the “Salesperson failure: Definition, Determinant, and Outcome (Morris MH, La Forge
RW, Allen JA 1994), respondents proved written definitions of the term failure when it
comes to the job of a salesperson. These were content analyzed, and the results suggested
a fairly high degree of commonality among the answers provide. The prevalent theme in
these responses was inadequate revenue generation, either in absolute terms, in
comparison to a quota, or relative to the costs associated with the salesperson. A number
of respondents also mentioned particular aspects of the sales task, such as poor
communication with customers, an inability to solve customer problems, low call
frequency, and inadequate follow-up or servicing accounts. Common too many of the
responses was the stipulation that performance deficiency had to be due to factors
controllable by the salesperson.
The definition were then sorted into three groups, based on whether the focused primarily
on input measures, outcome measures that were concerned with levels of sales achieved,
or outcome measures that were not sales-based.
Table illustrating checklist of information for common sources (4: p.6).
Increase in customer compliance

Behavior indicative of failure:

Reduction on order from key accounts

Bad work habits

Loss of accounts

Inappropriate dress/appearance

Not reaching sales goal/quotas

Unethical behavior
Selling wrong product
Selling to wrong customer
Unable to get along with buyers
Hard to work with and/or supervise

2.3.3 The important of the problem
Of all the challenges faced by business owners, the one that probably causes them the
most sleepless nights is the failure of their salesperson performance. Especially, this
happen in collecting debt from customers, so it is forcing many businesses in to making
some tough choices on how to use the cash they have available. Salesperson failure in

16


debt collection create additional economic cost for businesses, low employee morale and
decline in customer confidence.
-

Additional economic cost

If salesperson fail in collect receivable, it can give rise to tighter financial conditions,
leading to increased administrative and financial costs as external financing may be

necessary in order to manage cash flows. Hence, late payments can give rise to insolvency
and ultimately bankruptcy, which means that firms cease to exist or in other words, exit
the market. Mr. Le Truong Giang, the Accounting Manager said about the costs generated
by late – payment invoice:
“For every 1 billion VND of annual turnover, a three-day drift in an invoice due
can take 11.5 million VND bite out of working capital (1 billion VND /261 working days
per annum). For many businesses, this means resorting to increased borrowings in order
to bridge the gap. Standard business finance carries a 10 per cent interest rate. In this
example, that equates to an extra 8, 2 million VND in additional interest expense, directly
cutting into margins”
A cash flow problem also arises when a business struggles to pay its debts as they become
due. Therefore, when cash flow is consistently negative and the business uses up its cash
balances, the problem becomes serious. Additionally, it negatively affect business' credit
rating, credit report of company including: liquidity, efficiency and cash flow ratios… and
impact the ability to get credit account privileges and loans in the future. Mr. Ly Hoang
Thanh, the Sales Manager:
“We do not have a policy of refusing to pay interest or late payment charges. On
the contrary, we take payment to suppliers very seriously and comply with our
contractual and statutory obligations at all times.”
-

Decline in customer confidence

The relationship between salespeople and customers can get worse if both have no way of
dealing with overdue debts. The lack of skills in negotiating a sale contract will lead to
ambiguity in the terms of the payment of overdue interest. When a dispute arises, it is
very difficult to avoid complaints from customers. Not only will they not return to buy
17

company's good but also tell the other people about the bad story. This will affect both the
image of the company, showing the lack of transparency and professionalism of
employees in receivables management. Ms. Hang, Purchasing Manager of PEB Steel
Building said:
“SMC TT need develop a clear and visible process to sales staff to facilitate the
customer in checking and paying invoices in the signed contracts. Disputes on overdue
invoices that are not properly processed will negatively affect customer confidence about
company’s image”.
-

Low employee morale

The salesperson failure to manage the accounts receivable affects not only the
performance company, but also the employee's attitudes and morale. Excessive pressure
from the managers in bad debt recovery, customer disputes over invoices, huge workloads
on customer payment tracking will exhaust employee’s productivity. Employee morale
problems can quickly affect a team’s quality of work. Signs of trouble include missed
deadlines, an increase in mistakes or a decline in customer service and turnover.
3.

CAUSES VALIDATION

Salesperson failure is obviously the matter that any company have to overcome. There
were many causes lead by this issue.
Morris (4) state that causal attributions regarding failure were grouped into those
external to the firm, those that were company-related, and those were related to and
controllable by the individual salesperson. The leading external factor was competitor
aggressiveness, while training programs were the most emphasized company factor,
and a lack of enthusiasm was the most emphasized personal factor (p.9).
The detailed determinants and causes of salesperson failure has been listed below:

External factors:

Salesforce recruitment

Way salespeople are

Economic conditions

procedures

assigned to territory

Competitor aggressiveness

Salesforce training

Methods used to motivate

Customer loyalty

programs

salespeople

Company factors:
18


Ways salespeople are

Poor planning/organization

Insufficient product

evaluated

skills

knowledge

Personal factors:

Poor time management

Poor people skills

Lack of ambition

Lack of enthusiasm

Lack of experience

Not persistent enough
Based on the above Cause-and-effect Diagram and theories informed, two more in-deep
interview was conducted with the participant of Sale Manager: Mr. Thanh and Sales
Executive: Mr. Tung who will provide objective perspectives on the weakness of his sales
team in collecting debt task (the transcript and interview guide are mentioned in section
7.6 of the thesis). Three causes have been discovered as following:
3.1

Lack of Salesforce training programs

In SMC Tan Tao, the salesman do not have the specific programs to train and utilize a
number of financial tools to evaluate the credit solvency of a potential borrower, so the
granting of credit depends on the confidence the salesman and sales manager have in the
borrower's credit worthiness. To extend credit to and how much credit to extend, they are
lacked of a structured process to follow when determining which customers should be.
Mr. Ly Hoang Thanh, Sales Manager said in the interview:
“We do not have any training program for salesperson. They have to learn
everything themselves by observation how other people work, we are a friendly team and
everyone is happy to support each other”
In addition, because of industry characteristics, sales employee in SMC Tan Tao usually
have close relationship with their customer, that is build the perception of them to think
that delay for few days is acceptable. They are regularly visit and check raw -materials
demand, so if customer have the bigger order than current credit line they will not affair
to increase the limit to avoid losing the relationship in the future without considering the
ability to make the timely payment.
The question is how close is too close in customer relationship. Being professional as a
salesperson includes insisting on cancellation fees, prices, and payment periods. This is
exactly what should apply to the relationship between business partners: professional
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distance. Therefore, salesperson rely on gut instinct when deciding whether to extend
credit to customers, this would be dangerous.
3.2

Inappropriate criteria for sales performance evaluation

KPIs (Key Performance Indicators) should be the most important measures used by sales

teams to track their progress against strategic goals. A well-designed set of KPIs ought to
provide the vital navigation instruments that give salesperson an understanding of current
levels of performance. Those are some duty for sales executive position in SMC Tan Tao:
-

Responsible for maintaining and developing the steel product offered by SMC.

-

Seeking, evaluating and developing new and existing customers.

-

Responsible for the department's sales target assigned by the Sales Manager.

-

Manage customer's debts adhere to company procedures.
etc.
However, in practice, these well-intended KPIs can turn toxic of salesperson

because of the high proportion of sales target (accounting for 50% of KPIs) while
collection duties is only 10%. Furthermore, sales staff will receive commission regardless
the invoice isn’t paid. If the accounts gets passed 15 to 40 days, they only will be ranked
instead of A which is B or C for that month. This ranks have little effect on their bonus at
the end of the years, so they don’t try their best on collecting debt task. Mr. Tung, the
Sales Executive said in the interview that:
“SMC Tan Tao put KPIs in place to measure the relative sales performance of
salesperson. It then created league tables and rewarded the best performing sales quota.
The result was, the salesperson wants to sell to anybody and everybody, and be

comfortable with the client’s ability to pay to receive incentives for closing sales”
That is lead to the pressure to hit sales figure without considering other factors, salesman
affair that customer will no buy again anymore - those larger clients accounted for as
much as 40 percent of their revenue. Mr. Tung and Mr. Thanh also tell that:
“The salesperson is the one with the relationship with the customer and should be
used to resolve conflicts or billing discrepancies between the two companies. If you put

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the salesperson in the role of collecting money that gets over 30, 60, 90 days or
whenever…, the salesperson starts to become a bill collector in the eyes of the customer”
“At this point the salesperson is not as welcomed during the visits with the customer
because the customer is not knowing what to possibly expect for that visit/ call.”
In this case, salesperson think involving salespeople can impact the relationship with
the customer so that should be a consideration in deciding how and when to involve
salespeople. However, because of unclear KPIs, they think that they’ve escalated only
after accounting department efforts haven't succeeded. They don’t realize that no sale is
complete without payment and ultimately they should play a role. There's also the
question of paying commissions on collection or recognized revenue -- great if you can
pay based on cash received but also expect some resistance to that.
3.3

Poor skill in debt collection

On average, every salesperson in SMC Tan Tao has 30 to 50 clients, more work will be
created for salesman in tracking down customer's payment status, so it is not easy to track
and handle such a large volume of work if they do not have good planning skills. Mr. Ly
Hoang Thanh tell about difficulties in collecting debt.
“It’ depend on sales effort. How long they spent to read and analyze the credit

report every day. Time is money in sales. In the working hours, salesman have to make
many calls to have the order and handle other procedures. If he want to manage debt
well, he spend more time after working hours to detect which customers have late –
invoice and remind them soon.”
In the other hand, for customers with a good payment history, they always have a tracker
to handle the invoice is to the due days. This case, however, is not typical. There are even
those that contact the customer before the due date, just to remind them its close. For this
reason, to help the salesman in remember which customer need to look more closely, a
debt recovery report will be sent by the billing department every Monday. Despite the fact
that some salesman told they seemly don’t have time to read or totally forget to make a
follow-up call to ask clients directly if they have received the invoice and ask for a
specific date that the payment will be made. That’s why it’s so important to have a plan in
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