To support JMP on our journey of separating from SAS, the Finance team has grown. As an organization, we strive to share the “Why?” even if it sounds like complex Finance lingo. To satisfy all the bright, curious minds within JMP, JMP Finance will aim to explain basic Finance topics in a way that is beneficial to all.
3 Things You Should Know about Sales Credit
What is Sales Credit?
Sales Credit is a measurement of revenue calculated and determined by the Business Operations team. It serves as an incentive compensation used to motivate JMP sales staff to achieve the following business objectives:
- Rule of 40 company with 15% TSR (total software revenue) growth and a 25% margin.
- User acquisition growth by spreading the use of JMP products.
- Enhancement of the JMP brand in the marketplace.
The Business Operations team determines sales credit by taking sales revenue data from multiple sources, including (but not limited to) invoicing data from SAS and invoicing data from JMP First systems. Data cleansing and various calculations are applied, resulting in a final product called Sales Credit. Even though the quarterly revenue report released by Finance draws upon the same data sources, the overall sales credit figures may be different, due to the nature of the calculations involved.
Invoicing data from SAS systems can include inaccurate or missing information. During the data gathering process, the Business Operations team goes through a process known as data cleansing to enhance the data and ensure that only invoices for JMP-related products are included in revenue measurements. As we transition to the use of JMP First systems, this step will no longer be needed.
Why doesn’t Sales Credit match financial reporting?
Different currency conversion methods are used for Sales Credit and financial reporting. A series of currency conversions are applied to invoicing data (both from SAS systems and from JMP First systems). The general rule is that all invoicing data is converted to the currency of the sales team that it is assigned. For subsequent rollups to regional and global levels, additional currency conversions are applied that convert the invoices to the respective regional currencies, and to USD. All currency conversions are conducted using a set series of exchange rates, which are determined annually by Finance. The exchange rates remain fixed for the fiscal year.
In contrast, the quarterly financial reports feature daily exchange rates, which are used to convert all invoices to USD. The volatility of exchange rates since the beginning of 2022 has resulted in noticeably different exchange rates, especially when compared to the set of fixed exchange rates used for Sales Credit calculations. As a result, the aggregate TSR figures in the quarterly financial reports can be quite different from aggregate Sales Credit figures, although both are accurate.
Why does this matter for JMP?
Sales Credit serves as a timely measure of revenue target attainment, helping the sales organization stay on track toward achieving JMP’s business goals. Sales Credit is refreshed daily, allowing for more up-to-date tracking of current sales results than the Finance revenue reporting. It is important to understand sales credit and its impact on our goals.
Why does this matter to me as an employee?
Sales Credit is used to populate the JMP Sales Results Dashboard, found on the banner on InsideJMP. It specifically populates the Cumulative Sales Credit and the Cumulative Renewal Credit tabs found in the Cumulative Sales Credit and Won Deals report. The Cumulative Sales Credit tab features current and past year New and Upgrade Sales Credit, while the Cumulative Renewal Credit tab features current and past year Renewal Sales Credit.
New and Upgrade Sales Credit refers to revenue gained from new customers and revenue gained from the purchase of additional licenses by existing customers. Renewal Sales Credit refers to revenue gained from the annual renewal of JMP product licenses by existing customers.
Sales Credit is also a key component of the 2023 Sales Compensation Plan, which is issued to all sales employees.
Related articles:
EBITDA
P&L (Profit and Loss)
JMP Revenue Today
Revenue (Part 2)
