Meaning of Sales Audit
Sales Audit is simply an audit of entire sales process of organization ranging from use of distinct software’s, staff as well as the management strategies. This type of audit is focused on examining every aspect of business’s sale process for their effectiveness and finding which one are non-efficient in generating the revenues.
The sales audit is performed by business enterprises periodically in a systematic manner for analyzing and interpreting their working environment, strategies, objectives and principles. Analysis of all these components of businesses enable them to recognize the problematic and opportunity areas, thereby timely preparing plan of action for enhancing the overall sales performance.
Concept of Sales Audit
A business may choose to carry out a sales audit either internally or externally with the help of an independently recognized auditor. When going for an internal audit, there is a range of specialized audit software in the market which is used by personnel within the firm. Whereas in external audit, an individual from outside the organization is aligned to evaluate sale parameters of business. Data generated by Point-of-sale (POS) and Order Management System (OMS) is mainly used during sales audit for knowing the accuracy.
Steps in Sales Audit Process
Analysis of Hiring procedure
The process of sales audit begins with evaluating the hiring method used by the firm for recruiting sales staff. Auditor for knowing the correctness of the hiring process evaluates various parameters such as the full track record of personnel, their background, and overall experience, and also the criteria used for selection. In addition to all this, the auditor also verifies the effectiveness of training programs for ensuring that they are compatible enough for building required skills among employees.
Evaluating the market conditions
In the second step, the auditor for knowing the feasibility of the sales target set by the firm moves toward reading the prevailing market conditions. A swot analysis i.e., strengths, weakness, opportunities, and threats are known in order to identify the opportunities and threats existing for business in the external environment. Auditor main priority under this step is knowing the prospective threats which can arise from competitors and opportunities from which a firm can avail first-mover advantage.
Checking sales procedure
The auditor now moves on towards analyzing the sales procedure after knowing market situations. Sales procedure refers to methods or tools employed by the firm for carrying out the sales operations in the market. A company should ensure that it’s promotional and discount offers provided to clients align with profit objectives. The auditor performs a comparison between the actual sales operations and ideal sales procedures mentioned by the firm on paper.
Knowing the quality of customer services
Knowing the quality of services provided by a firm to its range of customers is also of prime importance in the sales audit process. It is seen how a firm treats its clients during the purchase of the product and after it is sold. Customers are more likely to go for the repurchase of brand products on the basis of after-sales services provided to them. Therefore, an auditor carries out a study on the service quality of the firm and accordingly gives any recommendations if required.
Analyzing the office environment
The office environment within which the operations are performed by staff plays a crucial role in achieving sales targets. Maintaining an appropriate environment is a much-needed thing for the firm in order to keep their employee’s morale high. The sales staff should have good relations with their managers, co-workers, and personnel of other departments for performing their roles efficiently. All of these aspects are studied in detail by the auditor which helps in preparing an adequate audit report.
Advantages of Sales Audit
Boost the profit level
A process of sales audit plays an effective role in enhancing the profit volume of a business organization. Firm by carrying out sales audits not only recognize the loopholes in their system but also came to know about multiple opportunities. When these unexplored opportunities are detected by businesses, they can utilize them for boosting their profit and sales volume.
Sales audits serve as a key tool to businesses for knowing various fraud occurring within their business process. When these frauds are identified by the firm, it can take preventive measures to stop sales fraud and other unethical behavior during selling that may harm the company.
The process of sales audit assists organizations in taking steps towards improving their market image. Information collected during sales audit adds transparency to organizational data. This data when presented to external stakeholders not only builds reputation but also opens channels for further growth.
Assist in budgeting
It helps in preparing an optimum budget for sale operations by the business enterprises. All the processes involved in the sale audit method are quite similar to one associated with budgeting. This way it supports the organization in preparing the right budget for subsequent periods.
Leads to operational improvisations
Business organizations can learn many things from sales audits towards enhancing their operational efficiency. Members of the sales audit team are more involved in the revenue generation activities of business enterprises. This way they can provide a better guide in comparison to the marketing team for improving the operations.
Lowers the capital cost
Firms are able to save large costs when audits are performed regularly and inadequate manner. They help companies in recognizing frauds, thereby enabling the issue of error-free and clear financial statements to the public. Avoidance of these errors will lead to saving billions by organization in coming years.
Audit reports are very useful in the easy settlement of business disputes. These reports contain a well-maintained record of all past business transactions thereby avoiding any chances of confusion and discrepancies. It is impossible for business enterprises to maintain a large set of past data in absence of audit reports. Therefore, if the firm is adopting a principle of regular audit then it can save a lot of time and money.
Disadvantages of Sales Audit
A sales audit is a costly process for an organization that involves checking multiple transactions related to business sales. Sales auditors may be required to meet personnel from the sales and marketing departments along with their heads. Many times it is required to meet with every team member in order to know the accuracy of sales data. All this makes the job of an auditor a tedious task thereby raising costs on the company’s account.
Chances of manipulation
Sales audits may sometimes present false or fake reports due to misrepresentation of facts by the company. The data collected and provided by the firm during a sales audit serve as a basis for carrying out an audit. When there is a lack of accuracy in the company’s data, it will ultimately affect the sales audit process in a negative way.
Harassment of staff
The sales audit program requires the involvement of almost every staff member of a business organization. They may be asked to give clarification on numerous data points by auditors on different stances. Many times the staff may feel they are getting harassed and are more bothered about this. It can even lead to conflict within the organization which will have an adverse impact on operational efficiency.
Fraud may occur
Information provided by the audit reports has a major influence on the company’s image in the market. Auditors when carrying out the auditing process may commit fraud in reports. The frauds which occur internally within the organization may prove beneficial for it in the short run. However, in long run, these types of frauds are more dangerous and may lead to tarnishing the business image in public.