Accounting Best Practices, Fifth Edition

8–4. Periodically Issue a Summary of Commission Rates

Even companies with a simplified and easily understandable commission structure will sometimes have difficulty communicating this information to the sales staff. The problem is that the information is not readily available for sales personnel to see, and so they are always breeding rumors about commission alterations impacting their income. This causes a continuing morale problem, frequently resulting in needless inquiries to the accounting department.

The simple solution is to periodically issue a summary of commission rates. If management is comfortable with revealing the entire commission structure for all personnel, it can issue a commission table to the entire sales force. If not, it can issue a salesperson-specific commission listing. The table should be issued no less frequently than annually. A good way to present the commission information is to include it in the annual review, allowing each salesperson time to review it and ask questions about it. Also, the commissions table should be reissued and discussed with the sales force every time there is a change in the table, which keeps the accounting staff from having to explain the changes after the fact when the sales staff calls to inquire about the alterations. In short, up-front communications with the sales staff is a good way to keep the accounting department from having to answer inquiries about commission information.

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