It’s not magic. Commission paychecks don’t just materialize in a puff of smoke. In fact, commission management is often a challenging job performed by skilled administrators.
Sure, on the surface, commission management appears easy. A few calculations and you’ve got what you need. However, this job encompasses far more than you may think. Calculations factor in for sure but a lot more goes into the overall process. Data, reporting, checking and rechecking and so many other tasks are required on the job. Commission administrators do quite a bit.
If you’ve ever been curious about what really goes into the commission management process, read on. We’ll take a closer look at each task involved in the job.
Data Management
Every single commission awarded to an employee is based on a data point. It might be a sale, revenue generated, or another quantifiable action. Whatever it is, that’s where a commission administrator starts: with the data.
First, the administrator must track down each and every number that factors into commissions. These data points may be located in a number of places, depending on how the organization manages them. Perhaps a CRM system hosts sales numbers and rates while an ERP offers revenue metrics. Some organizations may even rely on hard copies of statements to inform commission distribution. An administrator must deal with all of it.
The Commission Management process encompasses a number of tasks from data management and calculation to report design.
Once those numbers are tracked down, the administrator has to import them into whatever tool they use for commissions. In many cases, that tool is a spreadsheet. Depending on the source of those metrics, the administrator must spend time transferring numbers into cells. Excel accommodates imports of data but if the metrics come in a non-transferable document, that isn’t an option.
Calculation
After all those numbers make it into the document or tool used to manage commissions, it’s time to calculate. With a spreadsheet, that means incorporating formulas and applying them to a collection of cells. Excel offers about 475 formulas to choose from. Many who regularly use the program, know quite a few of those formulas. So it’s just a matter of picking the right one and selecting cells, right? Not really.
Even the most experienced Excel users spend hours plugging in formulas that perform the right tasks. And every single one requires a selection of numbers to formulate. With a few handy tricks, cell references get a touch easier but it still eats up a lot of time.
Once formulas are all situated, an administrator may cut and paste them into new columns or sheets. This happens when the same formula and calculation is needed over and over again for an employee or team. However, this opens up the probability of added human error. Cut and paste the wrong thing or fail to select new cells when needed and you’ve got an error.
Auditing
Avoiding errors in commissions is a very important step. Errors cost money. If one results in underpaying an employee, it could lead to commission disputes and legal action. No business wants to deal with that. So auditing needs to be a part of any commission management procedure.
When it comes to auditing commissions, administrators must review all data and calculations. They compare data sources and previous data entries to ensure they’ve got the right information in place. Additionally, each formula needs to be checked to ensure it’s calculating the right values.
In order to complete this part of the job, an administrator may spend hours pouring over a spreadsheet. If commissions spill over onto multiple tabs or other spreadsheets over time, they review all of them. This requires an immense amount of concentration and lots of staring at screens. Hopefully, they’ve got really big displays so they’re not squinting for hours!
Report Building
Once calculated and audited, that raw commission data needs to be reported. Commission reports serve a few different functions. First off, a summary report of earnings is required to cut a check for a payee. Secondly, an employee needs notification of their earnings. Reports offer other benefits as well but ignoring these two primary functions risks company morale and employee churn.
Due to the fact that reports ultimately determine what’s on that check, the report must be accurate and understandable. So as an administrator carefully transfers data into a report, they are doing some amount of re-auditing as well. The numbers that end up in that report must match what’s in the spreadsheet exactly.
Remember an employee reads this report too. Each line on the report informs employees not only of their earnings but how those earnings came about. It should answer all the questions an employee asks about commissions daily. What is this commission based on? How did you arrive at this number? When will I get paid commission for my next sales? Get all of that in there as understandably as possible.
Report Design
On top of being accurate, reports have to be understandable and easy to read. So an administrator takes on the additional role of report designer. This requires an administrator to recognize how a report should flow as well as where details should appear.
There are a number of ways to design a report but no matter how it looks, it must meet certain criteria to be effective. First, it should be readable. Font should be large enough that employees don’t need magnifying glasses to see their earnings. Spacing allows sentences room enough so that they’re not printed on top of one another. Second, it should follow a logical flow of information. Start with the numbers that determine earnings and lead up to that most important number: earnings.
Obviously, the most important information on that report should be in bold and stand out apart from the rest. Depending on the business, that information may include number of sales or revenue earned. Across all organizations, however, the absolute most important thing on there is earnings, so make it large and easy to read.
Report Distribution
After completing those reports, administrators need to get them in the hands of employees. The distribution method differs depending on the company. Some email each and every payee with their individual report. Others use online tools that allow commissioned individuals direct access to their own data. Still, others may use snail mail.
Whatever the chosen technique, an administrator spends time on distribution. Email being the most common, many attach reports to individual messages, find the correct email address then hit send. They do that over and over again until every single report has gone out.
In our experience, the easiest solution to this challenge is using an online portal, like our Core Portal. That way reports and dashboards are instantly populated with the information each sales rep or agent needs. They can then login and see all the information for themselves. No email attachments needed.
Problem Solving & Coordination
A commission administrator’s job is still not over. Once employees have a look at their commission report, they may have comments or concerns. They’ll need someone to field those questions and get them answers. That job typically falls on the administrator.
When presented with commission questions, an administrator doesn’t always have the answer right off the bat. They may need to run it up the chain of command or consult endless spreadsheets to find the answer.
Even if the administrator isn’t the one actually answering the question, they still coordinate between employee and stakeholder. They confirm every single issue gets addressed quickly, efficiently, and sufficiently. It requires problem-solving and coordination skills along with just basic people skills.
Communication & Collaboration
All of these tasks exist within the overall business environment. In fact, many commission administrators also perform additional tasks in their departments. So while this is a very involved and demanding task, it’s not done in a vacuum.
A good commission administrator communicates and collaborates with every department. They do this to not only solve employee issues but also to stay on top of changes and adjustments. When businesses shift, it can often impact how commissions are calculated. Commission management needs to be on top of all of this and incorporate it into every new calculation and report. Otherwise, they’ll be doing a lot more problem solving for employees when commissions are calculated incorrectly.
Communication also comes into play when an administrator recognizes something that doesn’t work in an existing commission plan. Perhaps sales reps aren’t getting rewarded properly for sales due to low rates. Maybe agents aren’t properly motivated to go after leads. A commission administrator can collaborate with the executive team to address these issues and offer new ideas. Well-managed businesses will always listen to commission administrators who are in the trenches.
If your organization needs a better way to manage commissions, we have a solution! Let us show you how Core Commissions application simplifies each and every step in the commission management process. Additionally, our Managed Services team can take over each or any of these tasks for you. We’ll tell you how.
Contact us today to set up a demo and we’ll show you firsthand how we make commissions easier. Let’s face the challenge of commission management together.