Accounting Best Practices, Fifth Edition

8–10. Install Incentive Compensation Management Software

Commission tracking for a large number of salespeople is an exceedingly complex chore, especially when there are multiple sales plans with a variety of splits, bonuses, overrides, caps, hurdles, guaranteed payments, and commission rates. This task typically requires a massive amount of accounting staff time spent manipulating electronic spreadsheets, and is highly error-prone. Most of the other best practices in this chapter are designed to simplify the commission calculation structure in order to reduce the amount of accounting effort. However, an automated alternative is available that allows the sales manager to retain a high degree of commission plan complexity while minimizing the manual calculation labor of the accounting staff.

The solution is to install incentive compensation management software, such as that offered by Synygy and Callidus Software. It is a separate package from the accounting software, and requires a custom data feed from the accounting database, using the incoming data to build complex data-tracking models that churn out exactly what each salesperson is to be paid, along with a commission statement. The best packages also allow for the what-if modeling of different commission plan scenarios, as well as the construction of customized commission plans that are precisely tailored to a company’s needs, and can also deliver commission results to salespeople over the Internet. The trouble with this best ...