Accounting Best Practices, Fifth Edition

8–12. Show Potential Commissions on Cash Register

The sales manager can have difficulty in motivating the sales staff to sell those products with the highest margins. This is a particularly galling issue when there are so many products on hand it is almost impossible to educate the staff about margins on each one. Consequently, the sales staff sells whatever customers ask for, rather than attempting to steer them in the direction of more profitable products, resulting in less-than-optimal corporate profitability.

A rarely used best practice is to itemize the commission rates salespeople earn on individual products right on the cash register. When combined with a listing of the commissions on a range of related products, the sales staff can quickly scan the data, identify those that will make them the most money, and steer customers toward them. Since the products with the highest commissions will presumably have the highest margins, this practice should result in higher company margins. The tool can also be used to emphasize sales on products the company is discontinuing and wishes to clear out of stock. Thus, by bring detailed information to the sales staff which is also tied to sales incentives, a company can increase its margins while also better managing its mix of on-hand products.

One problem is that this approach is useable only in a retail environment where salespeople ring up sales on the spot. It would not be functional at all, for example, if a salesperson conducts multiple ...