Business Negotiation October 12, 2015

The Expense Reimbursement Negotiation

You are a busy sales representative at a drug company with two major responsibilities. One is to meet with physicians in your area to provide samples and explain the effectiveness of your products, and the other is to sell those products to local distributors and drug stores...

You are a busy sales representative at a drug company with two major responsibilities. One is to meet with physicians in your area to provide samples and explain the effectiveness of your products, and the other is to sell those products to local distributors and drug stores. You incur considerable business expenses by having lunch or dinner with customers, supplying lunch to the doctor’s office staff, etc.

Sales department procedures stipulate that expenses be submitted for approval weekly and reimbursed by accounting every two weeks. Salespeople must, of course, maintain proper records and receipts for income tax purposes. For a busy salesperson keeping track of these myriad pieces of paper is a nightmare.

Each salesperson handles the records and receipts in their own way but are all expected to submit them weekly accompanied by a standard company expense form. Unfortunately, almost every submission for approval shows some expense receipts have been lost, other receipts are barely readable and still others show expenses in excess of acceptable limits but do list good reasons for doing so.

The result is weekly chaos, late reimbursement, constant negotiation and renegotiation between those that sell and their managers and between accounting and sales personnel. Sales morale suffers and people get angry.

The head of accounting and the sales managers are told to straighten out the mess. They got down to the business of finding a way out of the weekly chaos.

Together they assembled a team consisting of themselves and three others in the company: a representative from IT, one from systems and procedures and another well-experienced salesperson. Each member was assigned to study parts of the problem. Systems looked into the detailed work involved in maintaining records and receipts by the sales and accounting department. They found some unnecessary elements in the existing system. They determined that some expense limits had to be raised to reflect inflation and others eliminated by combining them into acceptable lump sum allowances.

The IT representative advised that a new smart phone application would be supplied to all salespeople that would be fully integrated with the company computers to track their daily expenditures. This would enable management to highlight any divergence from acceptable limits or procedures and allow them to request prompt justification or correction.

A new procedure was then created that reduced work for both the sales and accounting departments. Report quality was improved and simplified.

When people put their minds together to find a better way they find it. With that they gain respect and kinship for each other even if they have been at odds before. Conflicts and disagreements still occurred from time to time but these were resolved more easily and less acrimoniously than in the past.
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