---
title: "How Distributor Bosses Should Handle Annual Budgeting and Control in 2016"
description: "At the end of the year, it's time for summaries, reviews, and planning, with expense budgeting in full swing. Besides performance, expenses are a crucial part of daily management. Many distributors complain that store expenses are insufficient, but do they know the actual returns? This article discusses how to determine store expenses, create effective budgets, and control expense loopholes."
author: "黄静"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-01-07"
language: "en"
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# How Distributor Bosses Should Handle Annual Budgeting and Control in 2016

> At the end of the year, it's time for summaries, reviews, and planning, with expense budgeting in full swing. Besides performance, expenses are a crucial part of daily management. Many distributors complain that store expenses are insufficient, but do they know the actual returns? This article discusses how to determine store expenses, create effective budgets, and control expense loopholes.

At the end of the year, it's time for summaries, reviews, and planning, with expense budgeting in full swing.
Besides performance, expenses are a crucial part of daily management. For many distributors, teams often complain that store expenses are insufficient, but do they know how much revenue the money spent actually brings to the company? Is the investment in stores proportional to the output? Not every distributor has a clear picture of these issues. How much should be spent in stores? How to create an effective expense budget? How to control expense loopholes? These are all issues closely related to distributors.
**Major Expenses: Not One Can Be Missed**
For distributor companies, due to a lack of systematic supervision and management, the feedback on terminal investment effectiveness is often a messy account. Only at the year-end financial settlement do they discover poor output or even deficits. Therefore, it is essential to implement strict budget management for expenses, using budgets to check various operational indicators, control execution, and manage output. Among these, major expenses cannot be missed.
1. **New Product Entry Fees**
New product entry is the beginning of cooperation between distributors and stores. This is also a significant expense with no specific upper limit, usually determined by procurement personnel. To reduce entry fees, it is best to consolidate new products and enter them together. Avoid entering new products in batches; negotiate with stores in a "package" format to lower the entry cost per SKU and save negotiation time and human resource costs.
2. **Terminal Display Fees**
The placement of products in stores is crucial, and many "battles" are directly related to the competition for display positions. Good display positions can bring more sales opportunities. To secure good positions, not only good relationships but also significant investment is needed, including fees for dedicated shelves, shelf buyouts, and long-term end caps. Each of these is a substantial expense and requires careful consideration. When budgeting, fully consider the actual characteristics of the store and the company's goals for the new year to make a reasonable budget, ensuring resources are fully utilized while saving costs.
3. **Promotional Fees**
In-store promotional fees mainly involve using distinctive POP, light boxes, and pillar wraps to promote brands and products. This is a method of in-store visual merchandising and image promotion. Many distributors still remember the large-scale investment by "Evergrande Spring Water," which, together with local distributors, almost monopolized advertising in many stores. These fees are not mandatory hard investments; of course, such advertising would be more perfect, but when analyzing the budget, it should be considered based on actual circumstances.
In fact, to achieve good product promotion with low-cost promotional methods, it is necessary to find opportunities from other perspectives. For example, some distributors seize the opportunity when stores need to install awnings and provide them for free with product logos, meeting the store's needs and achieving free product promotion—a "kill two birds with one stone" approach.
4. **Relationship Fees**
These refer to expenses for building public relations with stores, which may be paid to procurement or store-level personnel. To establish good relationships with stores, necessary public relations and entertainment expenses are indispensable. On the other hand, distributors should also consider how to save on public relations costs while maintaining good relationships.
There is much to learn here. First, try to reduce consumption and entertainment expenses. When business personnel conduct public-funded activities, it is best to have at least two people from the company present. Second, gifts for procurement should be centrally purchased by the company and given in kind. Most importantly, the company should strengthen verification efforts to minimize corruption among intermediaries, ensuring that relationship fees are spent effectively.
5. **Promotional and Marketing Fees**
This is the largest expense item and is directly linked to product sales. For distributors, the most effective way to control promotional and marketing fees is to assign responsibility to specific individuals and implement quantitative assessment. Break down the fees to each salesperson and promoter, and evaluate their performance based on sales results.
**Specifically, budget control should be approached from the following aspects:**
**First, determine the scope and proportion of market promotion expenses.** The investment in promotional and marketing fees must calculate the input-output ratio. The budget structure generally includes promotional discount fees, used for product specials and giveaways. Typically, promotional discounts account for more than half of the total promotional activity costs; prop production fees, used for creating terminal activity props, with investment proportion usually controlled within 5% to 8%; terminal venue fees, used for negotiating promotional activity schedules and venue arrangements with stores, varying by store situation. Usually, the investment proportion is controlled around 5% to 15%; and personnel sales commissions. Incentives for sales and promotional staff are a strong guarantee of promotional execution. Typically, to ensure sales enthusiasm and terminal execution, manufacturers and distributors will introduce certain reward policies. In sales plan design, fully consider the interest-driven factors of personnel. This fee is mostly controlled within 15% to 30%.
**Second, determine the expense items, categories, reimbursement details, and suggested proportions.** To achieve scientific management, implement project-based management for marketing plans and, as much as possible, classify each link to assign responsibility to individuals and conduct quantitative assessment. Taking personnel assessment as an example, store salespeople should make detailed store personnel arrangements based on the activity schedule, and allocate the fees and materials assigned to the store to each person. Let everyone understand their work content and requirements, promptly grasp sales progress, and report issues to superiors in a timely manner.
**Budget Management Tips**
Annual expense budget management is crucial for next year's sales performance and has significant implications for cooperation with stores, market share, terminal image, and other indicators. Doing it well can promote the smooth completion of various indicators, while doing it poorly can lead to various problems. Therefore, it must be handled with caution. The following are several practical annual budget management methods.
**First, implement a store responsibility system.** To achieve unified management of fees invested in stores, implement a system where each store has a dedicated person in charge. Break down fees based on the importance of the store and sales contribution, ensuring that important stores receive more support and preventing money from being spent on stores with no value. The fees allocated to stores should be managed by a dedicated person, preferably controlled by a city manager or system manager, and executed according to the distributor's detailed rules. The advantage of assigning responsibility to individuals is clarifying the duties of business personnel, giving them rights while clarifying their responsibilities and obligations. This can fully mobilize the enthusiasm of business personnel and facilitate the implementation of distributor promotional plans.
**Second, implement an expense assessment system.** Linking expense usage only to sales volume is far from enough. It is easy to shout slogans, but to truly grasp it, it must be specifically implemented in the calculation of the cost-effectiveness ratio. Looking at absolute expense values like 1000 yuan and 3000 yuan is meaningless; you need to look at the relative value compared to sales. A normal cost-effectiveness ratio of around 10% is appropriate. Sales behaviors with a cost-effectiveness ratio of 50% or 100% are meaningless; they only make sales look good, but profits disappear in the process.
Strategic investment is understandable, but it is only a short-term behavior. Buying scale through expenses is acceptable in the early market stage, but it is not sustainable. If you don't just focus on the cost-effectiveness ratio, every expense can be a strategic investment. Distributors can use electronic data reports or financial data for control, regularly review the cost-sales ratio, and link it to business personnel performance. In this way, everyone will think twice before spending.
**Third, implement an approval and audit system for expense investment.** When store salespeople apply for promotional expense applications to the distributor, they must be required to submit them in the form of an activity plan. Moreover, for expenses approved by the distributor, a detailed expense usage plan must be formulated before execution, and promotional activities should be implemented according to the plan. The company must form a complete system for expense application, review, reimbursement, and audit, setting responsibilities for different levels of personnel based on amount and authority, so that every employee knows how much they can spend, how to spend it, and what the results will be.
The operational recommendations for expense budgeting should be listed by the company headquarters based on three years of historical expense data and the development plan for the coming year. First, set the overall budget target, then consider various dimensions such as regions, stores, and product lines, and then break it down layer by layer.
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