Selling Finance

How sales teams are learning the finer points of revenue recognition.

Geac Computer Corp.’s annual sales meeting is always a fun event, full of braggadocio and bonhomie, as salespeople gather each spring at a sunny resort. Last year, in addition to the usual pep rally, something new was on the agenda in Orlando: a class in finance. Specifically, it was a two-hour primer on revenue recognition — and attendance for the sales force was mandatory.

“Selling is an art,” says Donna de Winter, CFO of the $444 million (in revenue) software concern headquartered in Waltham, Massachusetts. “I don’t want to suggest I know anything about selling,” adds de Winter, who helped create the course, “but I do know how to structure a deal.”

Educating salespeople on acceptable structures is fast becoming a necessity as regulators crack down on questionable sales practices and irregularities in booking revenue. CA, for example, has been embroiled in an accounting scandal that involved improper booking of $2.2 billion in revenue. Six executives, including the former head of worldwide sales and the CFO, have been indicted. And in 2004, Qwest Communications International Inc. paid the SEC $250 million to settle charges that it fraudulently booked $3.8 billion in revenue between 1999 and 2002 — a probe in which two former Qwest sales executives were censured.

It doesn’t help, of course, that there are almost 200 different approaches to revenue recognition in accounting literature. It is hoped that a review project at the Financial Accounting Standards Board will establish a definitive standard. But in the meantime, it’s little wonder that revenue recognition was named one of the top three ongoing control risks in a survey of 400 finance executives by Softrax Corp.

To rein in that risk, many CFOs are formalizing finance education in sales. The trend is most apparent at software concerns — where bundled products and services wreak havoc with revenue recognition — but it is moving across many industries. And while the techniques vary, the goal is similar. “Salespeople don’t have to be experts, but it would be nice if they had some appreciation for the fine points of finance,” says Daniel Noll, director of accounting standards for the American Institute of Certified Public Accountants.

Selling to Sales

Instilling that appreciation is not easy. “Salespeople care very little” about the often-complex accounting rules that govern transactions, says Wendy F. DiCicco, CFO of Exton, Pennsylvania-based Kensey Nash Corp. Many view their jobs strictly in terms of sales and customer satisfaction, she explains, and consider financial aptitude “not their responsibility. Of course, their job is sales and customer satisfaction,” she adds, “but even so, that job has to be performed within the rules and regulations of the finance world.”

To be effective, say finance executives, education for sales must be repetitive and direct. For example, Mark White, CFO of SAP America, a unit of German software giant SAP, takes the issue into the field several times a year. Every quarter, he says, SAP hosts a conference call for 75 top finance executives to discuss new developments in revenue recognition. Then finance folks are dispatched into every U.S. field office to update the firm’s 1,000 salespeople. “This allows information to cascade through the finance department into the field,” White explains. In addition, the firm offers seminars on revenue recognition and maintains a Website on the topic.

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