improveit 360 utilizes six objects around calculating Commissions and tracking when those Commissions are paid out. Those objects are: Commission Rule, Sale, Commission, Commission Calculation, Commission Adjustment and the Staff Account. There are three Workflow Rules out-of-the-box, used to trigger when a Commission is calculated and marked “Ready to Pay.”
Commission Rule: Determines the calculation settings for how a Commission Calculation record is calculated for one specific Sale. The most basic Commission Rule is a flat percentage. Commission Rules can also support Rep Splits (Sales Rep 1 gets X percentage; Sales Rep 2 gets Y percentage) as well as Over/Under Split calculations.
Sale: The Sale record is where you will input the Commission Rule, the Commission Basis* and Rep Split percentages. *Commission Basis is the dollar amount used to calculate the Commission. Some companies use the Sold Price as the Commission Basis, others use a “PAR Price”, “Target Price” or “Should Sell Price” for the Commission Basis, while others use the Project “Profit” field to determine the Commission Basis. It is important to understand what each company uses as their Commission Basis.
Commission: This is the record resulting from a Commission Calculation. The Commission record will be updated if a Commission Basis or Commission Rule is changed and when the Sale Status is changed. The Ready to Pay field tracks what a Sales Rep is owed on each Commission record.
Commission Calculation: You will not need to interact with this object or record, although you may want to Report on it. This object is where the improveit 360 details the calculations of a Commission record Amount. The calculation is based on the Commission Rule settings and the Commission Basis of the individual Sale record.
Commission Adjustment: This record type will be created when a Commission record changes. Commission Adjustment records are used to track each time a Commission “Ready to Pay” amount is changed.
Staff Account: The Staff Account acts as a ledger for Commissions that are “Ready to Pay.” Using Staff Accounts allows a company to track when Commissions are due to be paid, and when they are paid out through Payroll.
About the Ready to Pay Amount and Clawbacks
When does the 'Ready to Pay' amount change? Out of the box, improveit 360 will move 50% of the Commission amount to 'Ready to Pay' when the Sale is changed to a Net Status. The remaining 50% of the Commission amount will be made 'Ready to Pay' when the Sale is changed to a Final status. If your company pays Commissions at different percentages, or different stages of the Sale, open a Ticket and request a customization to the Workflow Rules around when Commissions are made 'Ready to Pay'.
Using Out of the Box Functionality
There are Four (4) Out of the Box Workflow Rules around Commissions and when the Ready to Pay Amount is updated.
You will want to Activate the Ready to Pay Update Workflow Rule only if the Sales Reps are paid out on the same trigger (Net, PIF or Final) and all Reps are paid the same percentages at Net and Final. This ensures that if the Adjusted Amount changes (if the Commission Basis or Commission Rule are changed) that the Commission's Ready to Pay amount will be re-calculated. It also ensures that when a Sale is Canceled, any amount which has already been paid to the Staff, will be clawed back.
So, if you pay out 50% at Net and 50% at Final you will activate Workflow Rules 1, 2 and 4.
Commission Calculations
As we were entering our constant values, you may have noticed that dollar amounts began to populate next to each of the lines in the Commission Calculations section over in the far-right column. This happens because we had selected a sale record in the yellow section under the Commission Calculations heading. As a result, the system was performing calculations using the values that we input in the Constant Values section for the sale that we selected. This will make it much easier for us to determine which calculations we want to use for our rule.
Constant Values
Rather than starting with the Commission Calculations, we will jump down to the Commission Values section and begin to populate those numbers, because we know what they should be. Let’s go back to the original requirements for our sales commission and begin populating the fields in the constant values section with the appropriate numbers:
- Our company pays a flat 10% commission on all sales.
- If a sales rep sells over the target price that we’ve defined, we want them to get 50% of the overage in commission. However, in order to make sure they aren’t price gouging, we want to cap this, so they only earn commission on the overage up to 20% over the target price.
- Conversely, if a sales rep sells under the target price that we’ve defined, we want to subtract from their base commission 50% of the amount that they sold under what they should have sold it at.
Here is a breakdown of how each of the constant values work:
- Base Commission Percent:This field should contain the starting commission percentage. In our requirements above, this should be 10%.
- Over Limit Percent:The value in this field will be used to calculate the maximum price at which a sales rep can sell a product or service and still earn commission on the overage. For example, they should have sold something for $5,000 and they sold it for $6,500. Your company only pays commission on an overage of up to 20%. This means that the system would only calculate extra commission earned up to $6,000 (instead of $6,500), because $5,000 + ($5,000 * 20%) = $6,000.
- Over Split Percent:The value in this field indicates what percentage of the total qualified overage amount should be paid to the sales rep in commission.
- Under Limit Percent: This field should contain the percentage value that would indicate the total dollar amount that can count against a sales rep and deduct from their commission if they sold below what they should have. For example, a sales rep makea sale for $4,000, and they should have sold it for $5,000. Your company deducts from their base commission if the sales rep sold under the commission basis until there is zero commission earned. In this situation, we would want to put -100% into this field, because that indicated that they can have up to 100% of their commission deducted if they sell under the basis.
- Under Split Percent: This field should be used if your under limitpercent is setup to limit the amount of commission deducted from the sales rep’s base commission. For example, if you only deduct commission if the rep sells 50% below what they should have, then this field should contain the percentage of the underage that should be deducted from their base commission.
The commission calculations section allows you to select which system calculations you’d like to have included in your commission rule. The calculations that you select will each be added together to make up the total commission paid to a sales rep on each of their sales that the rule is used on.
Here are the most commonly used calculations (note that depending on how your company pays commissions, you may select multiple commission calculations for an individual rule):
- Base Commission Earned:This calculation simply takes the base commission percent (in our example this was 10%) and multiplies it by the commission basis on the sale (our commission basis was $9,200). Note that this does NOT apply any rep split, so you should only select this calculation if you want to pay a base commission and will never have more than one sales rep on a sale.
- Base with Rep Split:This calculation is the same as the one above, with the only difference being that it applies the rep split percentage specified on the sale. If you are paying any sort of base commission, this calculation is the safest selection, as it will work if you have one or multiple reps on a Sale.
- Over Under Commission:If you have a rule where you are paying additional commission if the rep sold over the commission basis, or are subtracting commission if a rep sold under the commission basis, and you will never have multiple reps on a sale, this calculation can be selected. This will ensure that the proper overage or deduction is applied to the base commission.
- Over Under with Rep Split:This calculation is the same as the Over Under Commission calculation, except it applies any applicable rep split percentage. If you are paying any sort of over / under commission, we recommend that you use this calculation as it will work if you have one or multiple reps on a Sale.
Enable the use of Staff Accounts
Commissions do not automatically show up in a Staff Account. You can turn on this feature by going to Custom Settings> Commission Settings> Manage> Edit> Pay Sales Commissions> checkbox set to TRUE.