Accounting Best Practices, Fifth Edition

Total Impact of Best Practices on the Commissions Function

This section describes the overall impact of best practices on the commissions function. The best practices noted in this chapter have an impact on four major accounting activities, as noted graphically in Exhibit 8.2. They impact the motivation of sales personnel, the calculation of commissions, and their payment and subsequent reporting. The vast majority of these best practices are centered on the calculation of commissions, since this step requires the most work from the accounting department. All of the best practices associated with commission calculations can be implemented together—none are mutually exclusive. Though the permission of the sales manager is required for several of these items, the end result—standardized commissions that are regularly audited, automatically calculated, and paid only from actual cash receipts—reduces the work of the accounting staff to a remarkable degree. Those best practices affecting the payment of commissions have a much smaller impact on accounting efficiency, while the one item affecting the motivation of the sales staff does nothing to improve the accounting department. Accordingly, the bulk of management attention in this area should go to improving the efficiency of calculating commissions.

Exhibit 8.2. Impact of Best Practices on the Commissions Function

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