Accurate commission calculations and payments are crucial to ensuring your sales teams are compensated fairly and maintaining your business profitability. Despite the importance of commission calculations, many businesses struggle with getting them right.
Manual commission management can limit an organization's scalability and growth. Like manual labor, it leaves room for human error, not to mention the time it takes to calculate commission manually. If you use spreadsheets to calculate commissions, every time you make adjustments or revamp how commissions are calculated, you have to start from scratch.
It's crucial to get your commission calculations right, whether you're just starting out or have been in the industry for years. Let's dive into the top three reasons why your commission calculations may be failing.
Reason 1: You're using spreadsheets
Spreadsheets are an accessible and easy-to-use tool for companies or industries with a small sales team. However, limitations and problems will arise as soon as your sales team grows. Consider that as your sales force grows in number and complexity, the time spent reviewing individual spreadsheet files also increases.
Before you reach the point where spreadsheets are continuously generating errors, you should consider adopting a solution that automates your commission calculations and payments.
Blitz is an automated commission management platform that can help you save up to 86% of the time spent on commission calculation processes. If your company struggles with errors and inaccuracies, it may be time to invest in an automated solution to eliminate these problems.
Reason 2: Human error from manual data entry
All the manual copying, editing, and managing of data in sales commission calculation spreadsheets inevitably lead to human errors. Additionally, faulty calculations may result from a single piece of data entered incorrectly, especially when using complex formulas.
Furthermore, the more data and formulas you use within spreadsheets, the easier it is to make mistakes. Until you become aware of the error, you'll be overpaying or underpaying your sales reps, resulting in disputes, a loss of motivation, and the eventual need to calculate the difference and facilitate reimbursements.
Reason 3: Lack of clarity in your commission schemes
A lack of clarity in commission schemes is one of the most common reasons why commission calculations fail. Your commission structures should be clear, concise, and easy to understand for your sales team. When designing your commission structure, outline the criteria for earning commissions, the percentage of commission, and any other important details your sales team needs to know.
Likewise, complex commission schemes can lead to commission calculation errors. When they are complex, it can be challenging to calculate commissions accurately, leading to errors and disputes. You should automate your commission schemes, making them easy to understand and calculate, to avoid this.
To avoid confusion or ambiguity, ensure your sales team has access to a detailed commission plan document. This document should outline the commission structure and the specific conditions that need to be met for each commission payout.
Bonus: Lack of automation
The lack of automation is another reason why your commission calculations may be failing. When commission calculations are executed manually, it can be time-consuming and error-prone, leading to incorrect payouts. To avoid this, you should consider automating your commission calculation processes.
An automated commission calculation platform can help you eliminate the risk of errors while providing accurate commission payouts. Additionally, a commission calculation platform saves time and resources, allowing your sales managers to focus on more important tasks or strategies rather than calculating commissions or tracking performance.
Commission calculations are a critical aspect of any sales team, and errors can lead to unhappy employees, disputes, and even legal issues. By addressing these three reasons why your commission calculations may be failing, you can improve the accuracy of your commission calculations and ensure that your sales teams are motivated to reach their sales goals.
Automating the process saves a lot of time, which is a huge advantage, especially for growing companies or industries. With an automated commission calculation process, sales managers or directors are freed up to focus on other critical areas of the business.
By implementing an automated commission management platform like Blitz, all those changes needed in your commission plans will be handled with just a few clicks. Additionally, Blitz is a solution that adapts to your industry-specific needs.
We aim to help you automate and improve your commission calculations and avoid costly errors that can negatively impact your business.