Russ Koshiol, Trade Business Solutions Specialist at General Mills shared the company’s best in class tips for budgeting in a trade promotion management (TPM) application.
Since 2012, the General Mills team has used FORGE foodservice TPM software to have a regular, clear line of sight to its dollars (including committed dollars and actuals paid out).
General Mills’ salesforce is fully empowered to manage their trade dollars and the team can easily monitor and control spending.
First, let’s define trade and performance. These are fundamental terms in the trade lifecycle:
- Trade: The funds paid by manufacturers to distributors and operators or retailers for performance
- Performance: The specific actions taken by a distributor, operator or retailer to drive growth
General Mills uses three types of budgets: variable, fixed and accrual.
- Variable budgets are used for price discount programs, where operator purchases determine spending and budget.
- Fixed budgets are mainly tactical dollars spent on things like new items or samples. Fixed budgets are assigned a specific amount to a customer or territory.
- Accrual budgets are based on customer volume; the more they buy, the more they accrue in their budget.
The 3 Basic Pillars in the Trade Lifecycle
- Funding: The 3 mechanisms to run your budget (accrual, fixed, and variable).
- Planning: The trade programs. Sales plans for how they’ll spend the money and how to drive performance (at distributor or operator level).
- Spending: The actuals in the TPM system – what’s getting paid and processed going against your plan — billbacks, off invoice.
⇾ Underlying across these 3 pillars is analytics & reporting.
Budgets & Funds
There’s more pressure on our budgets. Manufacturers are scrambling to do more with less, so we have to get creative and run efficient plans. We have to think, “How can we get better?”
Leverage your TPM for process efficiencies – everything ties back. For General Mills, focusing on an accrual budget methodology proves successful.
Sales Planning Empowerment
Trade always follows volume. Funding will go up and down with volume (accrual).
Volume forecasts directly impact your trade budget. In FORGE’s trade spend system, the volume forecast module enables an early read of innovation acceptance and volume estimates. Using the TPM application, sales reps have the ability to easily and clearly plan volume; quickly review the year’s budget and tweak it to your targets.
In the tool, sales reps can see if volume increases, the budget will grow. They can see if they’re losing volume too, providing clarity on budget changes or customer management. The tool gives sales folks an idea of where to spend and where to target. With this type of visibility, it’s easy to stay on budget and forecast volume accurately.
The rep can figure out their volume forecast, take a look at the back end what that drives their budget and efficiently manage their budget, and find the best opportunities.
Accrual methodology puts the power in the reps hands and takes fixed budget mistakes away.
Creating an Accrual Budget
Volume x Accrual Rate(s) = Budget
Volume = Distributor volume, delivered + forecasted for the year
Accrual Rates = Predefined rates for product groups
Example. Biscuits = $.50/case
How to Set a Budget in TPM
» The sales rep plans their budget in the TPM application – the TPM shows last year’s volume and price for that account.
» The rep decides they want to grow the business — they want to see 10% growth.
» The rep goes into the TPM, adds 10% across the board. The application automatically calculates the budget.
» The application shows actual YTD and the to-go numbers based on the forecast from the sales rep.
» The rep is able to easily manage and drive the budget for all of the different product groups.
“Offline budgeting, especially if you’re using a system like FORGE, is kind of like driving a car without the wheels. These tools offer a complete package to manage your trade business, and it only makes sense to utilize the system to its full potential. Then it all flows together. You have payments, programs and budgets all coming into the same system,” says Gina Schupanitz.