Errors happen. So much so that 88 percent of spreadsheets contain them. It may at first seem like a small thing: a decimal in the wrong place or misplaced formula. But those little mistakes can snowball — especially when you’re calculating commissions.
If left unchecked, small errors in commission management turn into huge and costly problems. Because commissioned employees rely on that income, a mistake in sales compensation could result in a dispute or even legal action. Between spending time responding to disputes and possibly even paying legal fees, those little miscalculations could end up costing hundreds if not thousands for a small sales organization.
While commission spreadsheets seems like an affordable option, they’ll inevitably generate errors that could cost you thousands of dollars.
Short of that, regular errors in commission payments may result in high turnover among salespeople. When organizations have to constantly hire new employees, it requires additional investments in recruitment and training.
If you’re curious which errors most commonly cause issues, here’s a shortlist:
Common Commission Errors:
- Dates: This is probably one of the most common sources for error. That’s because effective dates on sales often dictate when a commission is paid out. It can be recorded differently depending on who made the sale and how many approvals it had to go through. By the time it gets to the commission administrator, that date may be long after the salesperson closed the deal. A failure to get the date right can result in a failure to pay commission on time.
- Rate Variations: Different products and services often come with different commission rates. Within organizations with a number of different rates or tiered rates, it can get tricky to keep them all straight. Occasionally, an administrator may mistakenly apply the wrong rate, resulting in incorrect commission payments. That kind of mistake may not get caught until it gets to the employee who may have no other recourse than to submit a dispute.
- Plan Adjustments: Commission plans change. Sometimes they change quarterly; other times, yearly. Either way, if an administrator does not catch an adjustment in time or fails to get the details before the cycle ends, commission payouts will be affected. If this happens, administrators will have to go back, recalculate, and generate brand new reports, which can be frustrating.
- Hierarchical Changes: When someone gets a promotion or changes roles at a sales organization, their commission structure will change. A commission administrator needs the details on those changes before the next cycle to make sure the new compensation is reflected in their next paycheck. Due to a breakdown in communication, that doesn’t always happen as smoothly as it should.
- Merging Data Incorrectly: When an organization sells a number of different products and services and employs a large team, it’s likely there’s a number of data sources that need to be merged into commission calculations. It’s a task that can be overwhelming and can occasionally result in mistakes.
Now that you’ve seen the most common mistakes that lead to disputes, we can address how to avoid them or manage them.
How to Manage Errors:
- Toss the Spreadsheets: As we mentioned above — these spreadsheets are lousy with errors. So get rid of them. Switch to an automated system, like Core Commissions, that not only offers a one-click calculation solution, it eliminates errors. So instead of trying to manage errors, just get rid of them!
- Implement Dispute Management System: It’s good to always be prepared for disputes no matter what. Additionally, having a clear path to submitting disputes may instill trust in employees concerned about their compensation. Core’s application offers a dispute management feature that allows administrators to easily manage questions and get answers to payees.
- Integrate Data Sources: When data sources are connected directly to your commission solution, the chance for an error in merging data diminishes. Core offers integrations with any upstream or downstream data source to help administrators pull the data they need automatically.