Saturday, April 20, 2013


I have seen plenty of sales engineers who think their job is only technical. Is that really so? Definitely not. Say you are reading a detailed Notice Inviting Tender and you mark all clauses containing the words ‘debit’ or ‘credit’ with the remark ‘Accounts’, than you really are living in a fool’s paradise. Commercial terms are an indispensable part of any engineering parcel of any salesperson selling engineering equipment.
Young female executive reads terms and conditions

If you ever want to rise up the ladder by your hard work alone and one day manage a team of juniors, you need to be familiar with Managerial Accounts,which is a different subject from financial accounts.

Managerial accounts are those figures and ratios, which your management will study. These are the figures by which the-powers-that-matter, if you head a regional office-the management and if you are the CEO-the stockholder's interests. These are the people you are ultimately responsible to, so ignore them at your own peril.

      What are these commercial terms and what happens if we do not know them..? If I do not know my commercial terms, then I have no business in meeting customers. Not convinced? OK, let us say you are in a electronic appliances store, and you want to buy a laptop,  having already decided the model. As you are satisfied technically, you figure  that you need to know the price. And then you see the price say 280$. You think its a little expensive but never mind, you like it. Then as you open your wallet and start to take out the plastic money, it strikes you that you have no information at all and unless you have some more information, you CAN'T buy it, meaning there's no SALE. Being more precise
"There is no SALE because of the lack of the basic commercial terms"

            But what information that I do not have? What are all these things which I do not know? I have no idea whether the prices are inclusive of taxes and duties. I don't know what other charges are applicable e.g. Packing & Forwarding, Excise Duty, State sale tax, any discounts applicable? I even don't know whether they will accept a cheque or a credit card, etc.( But surely, I can get to know all this information by just asking the staff. Yes, I can do that but selling the laptop is not the issue here. Say, you are at a remote site and you want to place an order fast for some equipment. You have got two quotes, but one has no mention of basic commercial terms.)
        This is the kind of trouble you land your customer in if you omit the commercial terms. Please note that in business lingo, the words’intentional’ and ‘nonintentional’ mean the same. Your forgetting may be a human error but if the  customer suffers a loss because of your messed up quotation, that will not help his career too

The basic Commercial Points that requires a mention are
      (A) Price basis which tells the customer that your prices are quoted ex factory or FOR(this    means Free on Road-it tells the customer that you will bear the transportation expenses) or whatever.
  B) Taxes & Duties: If these are included in the quoted price; what are the rates ; what taxes are being charged etc.

  C) Delivery: How much time will the delivery take. In the laptop case, it will be immediate off  shelf but for customized items, deliveries differ.
      D) Payment Terms : 100% against material or through bank or through LC (letter of Credit) or maybe you want a 30% advance payment along with the PO and balance against delivery. We will discuss about this later for delivery and payment are very crucial factors for selling capital equipment.
      E)  Transportation and Transit Insurance
      F) Validity: Your price is valid till when. Say the customer comes after 6 months, will your price remain the same. Therefore you mention a period 4 weeks, 12 weeks whatever period your prices will be the same and after that subject to renewal.

      These are the main commercial terms. A lot of others are there like P&F costs, warranty, service support, accessories etc. but these are the main. Without one of them your proposal will remain incomplete.
For International trading /selling , we have a set of commercial terms uniform all throughout the world and  which is acceptable and applicable to all nations. These are called INCOTERMS. Every year they are reviewed and revised, if necessary. The picture below will tell you about INCOTERMS .You do not have to be scared of INCOTERMS. They are certainly not rocket science.

That was quite a post.
This point was important however. Anyway, whatever-hope you like it.
Love and best wishes from
(Someone from Bags-End)