Page 169 - Accounting Best Practices

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Commissions Best Practices
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A reasonable approach that greatly reduces sales staff complaints is a com-
mission terms table. It should specify the exact commission arrangement with
each salesperson so that there is absolutely no way to misconstrue the reimburse-
ment arrangement. Once this is set up, it can be distributed to the sales staff, who
can refer to it instead of the commissions clerk. There will be the inevitable rash
of complaints for the first few days after the table is issued since the sales staff
will want clarification on a few key points, possibly requiring a reissuance of the
table. However, once the table has been reviewed a few times, the number of
complaints should rapidly dwindle. The only problem with this approach is that
listing the commission deals of all the sales staff side-by-side on a single docu-
ment will lead to a great deal of analysis and arguing by those sales personnel
who think they are not receiving as good a commission arrangement. The best
way to avoid this problem is to separate the table into pieces so each salesperson
only sees that piece of it that applies to the individual. By following this
approach, the number of inquiries and commission adjustments that the account-
ing staff must deal with will rapidly decline

Cost: Installation time:

8–4 PERIODICALLY ISSUE A SUMMARY OF COMMISSION RATES
Even companies with a simplified and easily understandable commission struc-
ture will sometimes have difficulty communicating this information to the sales
staffs. The problem is that the information is not readily available for sales per-
sonnel to see, and so they are always breeding rumors about commission alter-
ations impacting their income. This causes a continuing morale problem, fre-
quently resulting in needless inquiries to the accounting department.
The simple solution to this problem is to periodically issue a summary of
commission rates. If management is comfortable with revealing the entire com-
mission 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 to a salesperson 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 the
commission information.

Cost: Installation time: