Incentive Compensation

What is Sales Commission Management?

Samra Taban
min read
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Your sales team is closing deals at the speed of lighting. It is looking super good on the revenue chart. So, what drives your sales teams? Is it the growth of the company? Maybe. Is it the zeal to be the best closer of the team? Yes, for some. Is it for the commissions they will receive for meeting and exceeding their quotas? Without a doubt, yes. 

Effectively running sales commissions is absolutely important for your business. Sales commission management software helps you manage and track the incentives sales reps earn by selling your product. It ensures that your reps are getting compensated accurately for their deals. 

Additionally, it avoids a lot of hassle between Ops and sales teams regarding their payouts. These disputes are caused by a lack of clarity in plans, deals and incentive pay percentages. It becomes even more tense when there are confusions in the territory and sales teams battle it out on who gets attribution of the deal.

 So, what’s the best way to approach sales commission management? 

A lot of companies run their sales commissions on spreadsheets. Manually, one or more people spend somewhere between a few days to a couple of weeks working on the commissions for every single sales rep based on a variety of commission plans they are currently on. 

Others use commission management software to do their work for them. This ensures that all the commissions are calculated for them without too much of their intervention. In this blog post, let’s dissect how commission management works manually and with sales commission software. 

Common Issues with Tracking Sales Commission Manually

  1. It’s dangerously error-prone: If you’re running your commissions on a spreadsheet, be ready to be bombarded with bags full of errors. Spreadsheets cannot bear the weight of complex compensation plans and are very likely to leave behind errors that are often not traceable. It leads to Ops spending a ridiculous amount of time troubleshooting and rectifying the errors. 
  2. It’s labor-intensive: Piggybacking on the previous point made, working on spreadsheets demands a lot of time and effort from the Ops team. You will have to work on the calculations per payee, feed in the compensation provisions and formulas to arrive at the end total, which at the end of all that hard work, might not even be accurate. 
  3. It’s outrageously inflexible: We know spreadsheets and what they are capable of, yes? They’re great if you have limited information to process, as in, a lesser number of reps and a fairly simple sales incentive plan. Say, you want to implement a rather complex commission plan, your spreadsheet will not accommodate it.  
  4. There’s a lack of transparency: Reps don’t have the remotest clue on what their commissions look like until they actually get paid. They have zero real-time visibility of their incentives. This is a massive problem as the commissions perceived in comparison to its reality can go in opposite directions causing a lot of internal disputes and a huge drop in motivation. 
  5. It’s incapable of scaling easily: We have sales teams because we want the business to grow. As your business grows, so will your sales teams and in turn, so will the need to scale your compensation management. Commission payments done manually are hard to scale and can be a very frustrating task to complete. 
  6. There are accounting and payroll barriers: Incentive compensation also has a certain level of accounting and payroll intervention that a spreadsheet cannot cater to. Data is hard to find and process for the finance team and therefore the process takes a lot more time than it ideally should to complete commission processing.

What is Sales Commission Software Used For?

Now, hopping onto sales commission software, let’s discuss how sales commission software can be useful to your sales incentives management.

  • The software can manage commission plans more efficiently, thus making your incentive program more agile. In the case of commissions being run manually, a higher number of plans along with more payees could break the commission process entirely.
  • It can successfully track all payees: internal and external. Even if your business has a higher number of payees spread across regions and placed in different comp plans, the software can easily track what’s happening in the workflow. 
  • If you have multiple sales teams, it can manage individual teams and their respective metrics, making sure incentive details of all team members are in the system. 
  • It can automatically fetch sales data from the CRM and other related tools that can be easily passed on to other teams such as finance and accounting. 
  • You don’t need to wrestle with formulas as your software is perfectly capable of calculating commissions on its own. 
  • You can find the complete audit history in one place making it effortless to be compliant and have all the details of your commissions ready during your routine audits. 
  • No more shadow accounting for reps. The software shows you all the data you need about your deals and therefore reps do not have to keep tabs on their payouts. 
  • When reps calculate commissions as per their understanding of the plan and deal, there might be a gap between their calculations and that of the end commissions they receive. This gap can be eliminated completely with software.

There are several benefits of building a workflow with sales commission software. Not only can you save time and money on your commission processing but also successfully simplify critical and complex processes. In turn, you increase productivity, improve transparency and boost performance of your sales teams.

Why Automate the Sales Commission Process?

We are not oblivious to the extensive use of automation in today’s business. Automation tools have been around for a while now. However, this pandemic has really catalyzed automation as businesses were forced to adopt a remote style of working. There was a higher dependence on software and therefore we have also seen more innovation in the industry. 

Sales performance management is diverse and critical to the success of your revenue growth goals. Operations are responsible for identifying the right tech and tools needed to achieve said goals and they bank heavily on the power of automation to get results. 

In the previous section, we briefly saw what a sales commission software can do. Let’s further explore why it’s a good idea to automate the sales commission process.

  • Eliminates common mistakes
  • Allows for forecasting 
  • Allows implementation of diverse commission structures to an individual level
  • Improves visibility into the sales commission process
  • Increases productivity of sales and finance teams
  • Enhances accuracy throughout the commission process
  • Provides better access to critical data and insights
  • Reduces errors in sales commissions calculation
  • Ensures the timely payment of commissions 
  • Communicates compensation clearly
  • Has a complete reporting ability
  • Avoids double data entry
  • Tracks sales, commissions, and bonuses
  • Reduces administrative time
  • Promotes increased trust and morale
  • Acts as a source of truth

What  Does Commission Management Software Have on Sales?

Accurate commissions can go a long way in having a positive impact on your sales teams. It can highly motivate your sales performers to go above and beyond in exceeding their targets. Why? They are able to visualize their commissions as well as have real-time visibility of the deals they closed and how much incentive they get for them. 

You can also help create and improve sales strategies. All the insights you require are readily available on your commission management system. The bird’s eye view of all the numbers is valuable to push sales up a notch. 

You can track the performance of your customer-facing teams in real-time to help you stay on top. It also gives you the means to foster a fair and rewarding work culture that makes all your top performers stay in the organization.

Questions to Ask While Choosing a Sales Commission Software

Now that I have put my case forward on why you should be using sales commission software instead of running your compensations manually on spreadsheets, you must ensure that you are picking the right tool to run your commissions. 

For that, I would suggest an exercise wherein you list out all the requirements of your sales compensation structures. Then, you can ask the following questions to get more clarity on the tools you are evaluating:

  • Does it integrate with my accounting system? 
  • What happens when I change commission rates?
  • Can salespeople see their own progress?
  • Can it respect the minimum and maximum rates? 
  • Does it maintain a history?
  • Does it handle bonuses?

If you require a more in-depth analysis of software capabilities, check out this sales compensation vendor evaluation scorecard that we made that highlights all the features and modules on which you should score a sales commission software.

Final Thoughts

A good sales commissions automation tool can do a lot more than save your time and effort. It benefits both your sales and operations teams. Your reps get a deeper understanding of the incentives they earn. It motivates them to close more deals. In the case of operations, you get precious insights into team performance, thus, nudging you in the right direction in sales strategy.

Learn how Everstage can help you automate your sales commissions process. Book a demo with us now.

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