How to Manage Commission Draws and Advances

by | Apr 13, 2021

The promise of a steady paycheck inspires loyalty in your sales team. That’s why many sales organizations choose to employ commission draws or advances. These methods provide income to salespeople during low-performing cycles under the assumption that they’ll pick up steam later. But tracking and managing these types of commission practices can be daunting.

Balancing commission draws against how salespeople meet their quotas can be a difficult task.

Employing a draw policy requires an organization to guarantee payment each month and applying draws to quota attainment. It’s a balancing act in many ways. But this can also provide several benefits.

The Benefits of Commission Draws or Advances:

  • Encourage New Hires: Offering draws to brand new sales reps will allow them to focus on training and onboarding. For the first few months, it’s unlikely a new hire will meet quota. Rather than penalize someone who just joined the team and likely triggering frustration, assure them they’ll get paid fairly until they can reach quota with a draw.
  • Keep Salespeople Loyal: As seasonal ups and downs impact sales, a promised and predetermined draw gives salespeople a sense of security. Often that security will inspire loyalty and prevent you from having to spend more time and resources on employee churn.
  • Support Employees During Slow Periods: Unforeseen events that scare off customers happen. These can be global pandemics that force buyers to reduce budgets or other more localized occurrences. Either way, they’re out of your sales team’s hands. During those periods, it’s important to continue supporting your staff even if they can’t meet quota through no fault of their own. That’s where a draw comes in.

How to Implement Commission Draws or Advances:

  • Determine Draw Amount for Sales Reps: Consider the on-target compensation for sales reps. When a salesperson can’t reach that target for reasons outside of their control, how much can your organization back? Once you’ve calculated out that amount, set that as the pre-determined draw amount for your sales reps.
  • Figure Out Type of Draw To Apply: Draws can either be recoverable or non-recoverable. In the case of the former, an organization can garnish future wages if a salesperson continues to fail quota attainment. This generally happens when the factors preventing a rep from achieving quota have passed and the employee is still struggling. It’s sometimes referred to as a chargeback or clawback. On the other hand, non-recoverable draws do not have to be paid back.

Best Practices for Commission Draws or Advances:

  • Cater to Salespeople as Individuals: When creating a new commission draw policy, it’s important to consider what challenges each salesperson may face. For each challenge, a different draw policy may be needed. If developed properly, salespeople will feel personally supported by a draw policy that keeps them afloat during those challenges.
  • Set Clear Terms for How Draws Work: Outline exactly how and when salespeople will have access to draws. This may include periods of training as well as other instances when quotas will be just out of reach.
  • Communicate the Policy Thoroughly: As with any commission plan change, it’s key to communicate that adjustment to your team. The more they know about how they can get paid, the more prepared they’ll be to perform. And if they understand the details, they’ll be less likely to submit disputes or get frustrated over the results.
  • Use Powerful Tools to Track Draws: Implement sales commission software, like Core Commissions, that will help you stay on top of when draws are distributed and when they need to be recovered.

We can help you navigate commission draws in your commission plan. Contact us or get a free demo so we can walk you through it. We look forward to introducing you to Core’s powerful but flexible application

Related Posts

NetWolves Cuts Commission Processes From 15 Days to Three Hours Thanks to Core

Founded in 1998, NetWolves is a global telecommunications and internet Managed Network Provider that offers businesses a single-source solution ...

What is a Clawback Provision?

For organizations that use a variable compensation plan, it’s common for there to be some form of a clawback provision incorporated into their ...

How AI Automates Sales Report Auditing

Auditing sales reports and commission payouts can be a daunting task, especially for businesses with large sales teams or complex compensation ...
Share This