Sales Compensation Blog

What is it and why should you automate the process? 

Everybody who has tracked and paid commission has had to wrestle with this problem. Some set of order transactions relevant to the Sales Plans in place has to be collected, and then each of those transactions has to be examined to see:

• Who gets assigned the transaction and
• How much will be applied to each goal

For small to medium businesses, this process is usually manual and often subject to interpretation depending on how well the commission agreement documents the nuances.

When plans are not sufficiently specific, much time can be lost to disputes after the commissions are paid. These disputes happen more frequently when the sales effort involves collaboration of any sort, which is most of the time. It is best practice to reward everyone involved in the process and to have one measure in common between them, but if you aren't careful during planning you can easily underestimate the financial costs. These costs are not limited to the actual incentive payout. They may include:

• Higher comp cost due to double/triple crediting
• Resentment and morale deterioration
• Management distraction
• Legal costs if disputes cannot be resolved internally

One of the key benefits of automation is that it forces you to document the full set of credit rules. Computers aren't very tolerant of ambiguity, so you must be specific.

Bottom line, take the time now to look at your data and determine how to describe all the credit rules as clearly as possible. If you don't, then anything you do to resolve an issue after you've wasted time on dispute resolution will set a precedence and therefore become "the new rule."