Black Sales Journal

When I discussed this over a year ago, I wanted to stress the importance with knowing your company’s expense policies and to stress avoiding even the most correctable errors.   Proper personal expenses management is that part of your sales activities that merely helps you maintain your credibility and gives managers confidence that you will do the right thing when no one is looking.

Following the program correctly won’t necessarily get you a lot of additional points, but it will secure you in the mind as someone who can be trusted. Be smart and in control of the process.  Knowledge counts here.  Read this and remember, ignorance of the policy is no excuse.  Read on…

__________________________________

Business entertainment, especially customer dining, is an event that we may take for granted.  It is important for most businesses but always suspect as an expense that can be smartly trimmed in terms of cost, and even frequency.

Business entertainment is a tool that when used wisely can aid in relationship building.  When done correctly, this can result in far greater returns than the business meal or entertainment actually amounts to.

If you desire to claim a business lunch, dinner, or other entertainment, these expenses should be directly related to the business purpose.  The meal or refreshments should be related to the legitimate image business activity, and should be able to stand the test of proof.  Technically, only then would you and your employer be allowed to treat these expenditures as expenses, and not as income when the burden of proof comes along.

Getting Technical

The IRS sets some basic rules that individuals and business follow.  A quick review of the rules that the IRS as set forth will show a couple of rather simple tests:

Directly Related Test

To qualify for reimbursement under the directly-related test for entertainment, including meals, you must be able to prove the following:

• The main purpose of the combined business and entertainment was the active conduct of business.
• You did engage in business with the individual during the entertainment period
• You had more than a general expectation of getting income of some other business benefit at some future time

The Associated Test

If the expenses meet the directly-related test, they may qualify under the associated test.

This test states that entertainment is:

• Associated with the active conduct of your trade or business and,
• Directly before or after a substantial business discussion.

This test includes the Substantial Business Discussion rule that is a requirement of deductibility for your employer.

According to Publication 463 – Travel, Entertainment, Gift, and Car Expenses for 2010 from the Internal Revenue Service, “A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific benefit.”

Keeping Credibility

Accuracy and truthfulness are at the heart of professional credibility for the Black sales professional.  Even greater is the fact that only one instance of inaccuracy or untruth can do away with years of work establishing the credibility.  There is more on credibility in the last Black Sales Journal 3/31, Credibility – A Goal of the Black Sales Professional.

I am going to cite some basics, and these are truly basics for expense report integrity.  Here are some suggestions for keeping your standing and credibility intact regarding expenses:

• Be timely – Submit your expenses no later than 1 week after they are due.
• Be organized – Keep information in a system that allows you to produce your receipts and expense forms as is necessary.
• Insure accuracy - If you do your expenses regularly, you will be under no time pressure.  The accuracy in your reports builds confidence.
• Be honest - Above all, there is truly nothing worthwhile to gain by having your employer pay for a lunch for you and your friend.  It is frankly not worth it!  Only claim what you can prove using receipts.
• Be Knowledgeable – Know intimately your organization’s expense policy.

Some Business Entertainment Specifics

We all have a particular responsibility when it comes to business entertainment, and especially meals.  We should make sure that the meal or event matches the business purpose.  There should be no instance where entertaining at the most expensive restaurant in town happens for a casual business discussion.  Remember, being modest and practical is prudent and a sign of good judgment.

Here are some basics entertainment do’s and don’ts that you may benefit from:

• Take Ownership – Forget the roulette that takes place where you the participants of a meal wait for the bill to come, then “wait” each other out to see who will pick up the check.  Unless the customer has advised that they are picking up the meal, they are probably not going to do it.  “Own” the event and then the rest of these strategies will be possible.
• Wine - If you are the host, only you should order the wine.  You may not realize why if you have never been burned, but the ordering of wine is an extremely high expense at an upscale meal.  If you are unsure you can accept someone’s counsel, yet your job is to order, and replenish the wine.  Feel comfortable stating to the server, or wine steward that you are responsible for the meal, and you will be responsible for the wine.
• Cordials and Liqueurs – If you open up to your guest having these, you could be in for a surprise.  Once you open that gate, you are hard pressed to control the cost of any one of them.  An aged port could definitely be in range, yet some of these items could be the price of a small pony.
• Order First – It may seem like bad manners, yet the host ordering first begins to set the tone.  When you order a fairly simple strip or filet, you are sending a message that the ‘market-priced’ lobster, which then attaches itself to a filet to make surf and turf, is probably above the price point.  Now, they may still do it, but the majority of people get the hint.
• Know When to ‘Cut it Off’ – This is always uncomfortable, yet practical.  After the meal, when the laughter and libation goes on, know when to say to the server that you need the check.  That does cut it off…at least for you.  If someone else wants to pick up the tab, it can start there.  This is responsible, and practical.  If it seems like it is wrong, think about the bill you are going to submit, and how management is going to react to it.
• Tip Correctly – If you tip correctly you will always find those who serve you eager to have your table.  Great service deserves 20% or more.  Good service deserves 15-20%.  I have had some mediocre service at times, yet did believe that 15% was warranted, because of the size of our group.  I cannot ever believe that a tip should be stiffed unless the server was rude, insensitive, and downright awful.  If that were the case, I would be having a conversation with the manager as well.  If you are unwilling to talk to a manager, then stiffing a tip is more retribution than anything else.
• Treat Wait Staff Properly – When you are entertaining, much can be ascertained about your view on your staff and others by the way you treat the wait staff.  They are not perfect, and you are not either.  I have seen customers make a decision to avoid a formal business relationship with a vendor when that vendor launches aggressively into a server for forgetting something small.  That is about rudeness, and even sometimes about power.

Use Good Sense

It is all about using good sense.  When you do it, the most common mistakes are avoided.  Don’t feel peer pressure, or the pressure that makes people do those things that are regrettable.

Build a relationship with your customers, not a game of one-up.  Be modest when they treat as well.  You will build a relationship with your consistency.

Your comments are welcome.  You can reach me at Michael.Parker@BlackSalesJournal.com.

A conversation today in the sales department:

Your Manager – “You are not getting it done.  Your territory is underdeveloped, and we are prepared to go in a different direction.  We are prepared to terminate you effective immediately.”  He goes on to say, “However, if you would prefer to resign we would be willing to extend some benefits that you would not get otherwise.  We would request you produce a letter of resignation and sign a severance agreement.”

You – “I am not sure of what I should do?  I need to think about it.  I will get back to you tomorrow.”

________________________

There is nothing gracious about this moment.  There will potentially be a moment when you realize that you are probably going to be taking your talents elsewhere. Of course it may not be your choice.

Since there is nothing gracious about any of it, you should understand that in most cases as this is not personal, it is business.  Business can be cold sometimes…actually frigid might be a better word.

Let’s talk about a decision that could affect your future.  The implications affect both your current and future employment, and you should know them now as when the going gets rough, you don’t want to be deliberating while steeped in emotion.

Should I Resign?

Most sales professionals will deal with this in their lives at some point.  Whether it is because of lack of ability, weak product, poor territory, out-of-line pricing, or some other factor, it is not uncommon to reach the end of the line with your employer.  The Black sales professional have even a little more to be concerned about as credibility for future jobs comes at a premium.

If you have been on a sales performance program (see BSJ 4/30, Are You on a Sales Performance Program?  Can You Beat it?) you recognize that one of the common features is that there is usually a trigger date; that date which termination is imminent.  On this date you are going to have to make this important decision.

Apart from the obvious reasons for importance, you are faced with some important alternatives.  Here is why it is important:

• Concerns with Unemployment Compensation –you normally don’t get it if you voluntarily leave your position.
• Your need for employee benefits – this problem happens whether you resign or are fired.
• Concerns with credibility and marketability – as it would concern future employers may be preserved. This is not as prevalent in sales, but certainly is true in other occupations.

When you face this moment, you must realize that the sales occupation is a little bit different than many other professions in the fact that terminations are not wholly uncommon.  In almost all situations, the objective of the employer is to quickly end the employment relationship.

At this point, you may want out as well, it is how it is done that is important.  In some states and situations, resigning can rob you of the rights to your unemployment benefits.   These benefits could be your lifeline while you are out of work.

Resigning may give you an opportunity to negotiate the terms of your resignation.  A lot depends on the strength of the ‘case’ against you and how badly they want you out.  Negotiation may be a strong word in this case, but you might be able to get some better terms for your termination.

Should I Get Fired?

Being fired evokes strong emotions.  Obviously it is a still a termination, but it sometimes creates a feeling of powerlessness and victimization.

Aside from the emotional, this termination can have its good and bad points as well:

• You normally get a severance package.  Nothing comes without exacting some price, and in this case it probably will be your right to an employment action of any type.  Remember, once you sign the severance agreement, you are ‘toast’ regarding any action that you may later seek.
• Most sales professionals don’t get fired for doing something egregiously wrong; they get fired for not producing the right sales numbers.
• Sales, as an occupation, differs from many other positions in that there is a minimal stigma to getting fired for lack of production or effectiveness.
• If there is a ‘package’ of some type as an incentive for leaving quietly, you will probably have your noncompete agreement copied and put in front of you as a part of any severance you get.  You may want to negotiate this carefully as your ability to work for another employer is dependent on not having a restriction!

Terminated for Cause?

This is the exception to all of the rules.  If you have done any of the ‘infractions’ that result in a legitimate termination for cause, you could potentially leave with nothing.

These infractions include, but are not limited to:

• Intentional acts of fraud against the company
• Stealing from your employer
• On the job drinking or drug use (as defined by the employee handbook)
• Intentional breech of company policies
• Wanton damage to company property

Some Points to Remember

We are talking about sales personnel, and that is a defining point.  I am pointing out the fact that even the best sales professionals find themselves in situations that result in termination.  They move on and find success elsewhere.  It is the way it goes.

When your previous company is contacted regarding your role there, they are extremely limited as to what they will say.  They normally only give the following information:

• Verification of employment and title
• Verification of dates of employment
• Verification of salary at termination

Larger firms stick to these numbers and go no further.  None of this is incriminating.

Make a wise decision based on calculated information.

Always be prepared.

Your comments are welcome.  Contact me at Michael.Parker@BlackSalesJournal.com.