Accounting Best Practices, Fifth Edition

8–1. Automatically Calculate Commissions in the Computer System

For many commission clerks, the days when commissions are calculated are not pleasant. Every invoice from the previous month must be assembled and reviewed, with notations on each one regarding which salesperson is paid a commission, the extent of any split commissions, and their amounts. Further, given the volume of invoices and the complexity of calculations, there is almost certainly an error every month, so the sales staff will be sure to pay a visit as soon as the commission checks are released in order to complain about their payments. This results in additional changes to the payments, making them very difficult to audit, in case the controller or the internal audit manager wants to verify that commissions are being calculated correctly. The manual nature of the work makes it both tedious and highly prone to error.

The answer is to automate as much of it as possible by having the computer system do the calculating. This way, the commission clerk only has to scan through the list of invoices assigned to each salesperson and verify that each has the correct salesperson’s name listed on it and the correct commission rate charged to it. To make this system work, there must be a provision in the accounting software to record salesperson names and commission rates against invoices, a very common feature on even the most inexpensive systems—though if it does not exist, an expensive piece of programming work must be ...