Here at Sales Cookie, many customers ask us how commission software can help them. They also ask questions such as “Could I replace my CRM system with commission software?” or “Is my setup compatible with commission software?“. What is commission software good for? Are you ready for it? Is it ready for you? Can it solve your specific commission problems?
What Sales Commission Software Is For
Sales commission software is designed to fulfill two key objectives:
- Easy administration. Make your commissions easy to manage. Make them flexible. Deliver correct calculations. Comply with standards. Pay reps on time.
- More visibility. Give your reps & managers real-time visibility on commissions. Make payouts transparent. Allow reps to monitor their progress towards goals.
To fulfill both objectives, all commission software include two key components: an administrative component, and a rep/manager component.
The Administrative Component
If you work in SalesOps, sales commision software is going to make your life much easier! The administrative portion includes:
- A way to properly manage commission plans and make your incentive program more agile. When choosing a solution, make sure the management interface suits your tastes and feels user-intuitive. Also, make sure there is enough flexibility – for example the ability to create one-off plans (ex: spiffs, bonuses, sales contests, etc.), and core features such as dynamic crediting, scoring, filtering, etc.
- A way to track payees, whether internal or external to your organization. This gives you the ability to manage plan eligibility, territories, job titles, team structures, user permissions, user enrollment, acceptance of terms and conditions, etc. The most flexible solutions understand those change all the time.
- A way to manage individual & team metrics. Metrics can be territory quotas, attainment thresholds, payout rates, bonus amounts, etc. Most systems include a way to bulk-upload metrics and define time-dependency (ex: “this rep’s quota was 100K last quarter, but 120K this quarter“, “this rep was a member of team of NorthWest until June“).
- A way to automatically fetch sales data from various CRM / accounting systems. This can be accomplished using various APIs or native connections. Ideally, you should be able to connect to your favorite CRM system once, after which data is automatically synchronized.
- A way to calculate commissions in-bulk (across your entire payee base). This process could be manual (it should only require a few clicks), or it could be fully automated (ex: automated daily re-calculation). A robust commission management system will also provide the ability to manually override / adjust commissions.
- A way to audit commissions – make sure there is:
- A way to review commission payouts
- A way to review crediting of deals to reps
- A general alerting system (to deal with calculation errors, bad data, etc.)
- A general audit log (to track all changes made to the system)
- A way to manage currency exchange rates
- A way to audit and manage the overall cost of your incentive program
- A way to ensure compliance with accounting standards (ASC 606)
- A way to ensure legal compliance (ex: user enrollment, e-signatures)
These core administrative capabilities is what allows you to focus on higher level tasks and eliminate messy commission spreadsheets. Commission software also eliminates the single point of failure when only one person knows how to calculate commissions. How so? Because, once automated, your commissions are fully documented as crediting rules, payout rules, filtering rules, rollup rules, etc. And any authorized admin can calculate without knowing all the intricate details.
A Rep & Manager Component
If you are a VP of Sales, this is for you! This highly visual component helps you motivate your reps, improve commission transparency, reduce shadow accounting, and eliminate disputes. The rep & manager portion should include:
- A way for payees to see real-time deals they were credited with, along with the ability to search them, download them, etc.
- A way for payees to see real-time which payouts to expect, review their progress towards goals, access historical statements, etc.
- A way for managers to identify commission trends, review attainment, compare individuals, and access aggregative & individual data.
- A way for managers to motivate their team through clear goal setting, gamification, or non-monetary badges / prizes.
- A way to centralize dispute management via self-service. Payees should be able to submit questions and track resolution.
- A way to handle multi-currency scenarios for payees whose currency is different from the organization’s default.
- A way to keep the information flowing – ex: rep surveys, post notifications, announcements, embedded docs, etc.
What Sales Commission Software Really Isn’t For
As we’ve just seen, good commission software can be incredibly powerful. If you’ve been using spreadsheets for commissions, it’s going to look like magic! But is it really the “all-in-one” holy grail of sales software? To make the best use of commission software, you must understand what it’s designed for, but also its limitations.
Sales commission software isn’t a viable replacement for a proper CRM
Commission software is specialized software which is entirely focused on automating sales commissions. Commission software doesn’t provide all the core features a good CRM or sales tracking system provides – such as the ability to create custom views, define custom entities, create new form templates, integrate with email clients, etc.
Commission software works with your sales data by pulling a read-only copy to automatically credit reps and calculate commissions correctly (as per your configuration). The advantage of this architecture is that you are not dependent on one specific commission solution. You can easily switch to another commision automation solution any time since your CRM system retains all your core sales data.
Sales commission software shouldn’t be your system of record or data cleansing repository
Sales commission software won’t help you deal with incomplete or inaccurate sales data. Commission software isn’t designed to merge contacts, find duplicate accounts, mark invoices as paid, etc. That’s the role of a proper CRM or accounting system. Sure – you can always upload messy data to your commission software and calculate commissions, but garbage in also means garbage out.
Before using commission software, you must ensure your data is complete and accurate. Commission software pulls sales data from existing sales systems, so it’s important for this data to be as accurate as you want your commissions to be. If you just have approximate amounts recorded on deals, you will get approximate commission amounts as well. This could prove costly and infuriate your reps.
Sales commission software shouldn’t drive your commission plan design
Commission software is ideal when you’re happy with your commission structure, but not happy with how manual or onerous the process is. If your commission structure in murky or unstable, it’s going to be near-impossible to automate things. To automate calculations, you must have crystal-clear clarity regarding all rules, amounts, thresholds, conditions, payouts, formulas, quotas, etc. Without knowing this precisely, how can you configure anything?
We recommend running calculations manually for one period before automating. This helps you verify all required data is available, and can uncover “gotchas” or missing exceptions. Without practicing it, your commission structure remains hypothetical. For example, let’s say you decide that commissions should be paid when you get paid. Do you even record payment dates?
In addition, while powerful, commission software can’t deal with unreasonable commission structures. I mean, those “I’m so special” commission structures, with endless rules / conditions / exceptions. First, unreasonable complexity can lead to conflicting logic. Second, those rules will continue to confuse your team, even if automated. Third, you’ll still want to audit results, and this will continue to take significant time.
Finally, the more complex your commission rules, the harder it is for you to track all the data required to correctly credit and calculate commissions. In short, commission software cannot compensate for an unclear or over-complicated structure. Finally, commission software makes it easy to create one-off exceptions / overrides. But if that is going to be the norm, then you won’t benefit as much from automation.
Sales commission software is not a revenue-reporting system
Commission software specializes in commission administration and commission reporting. Revenue is often an important, but not necessarily critical, metric for commissions. For example, a company could use multiple incentive plans – one based on revenue, one based on profit, and one based on a number of calls. In this case, revenue data is not utilized across all commission plans. This makes revenue-based reporting dubious.
We get it – the best sales commission software solutions provide advanced analytics capabilities. It’s tempting to leverage them to create revenue-related reports. But there is still a strong focus on commissions. Do you want to view total revenue by month? Well, you could, but it’ll be total credited revenue by month, which is a bit different. So, you’re better off running revenue-related reports within your source system.
Sales commission solutions aren’t designed to replace CRM or accounting systems, but to work in harmony with them. Sales commission solutions are quite specialized. They should never be treated as all-in-one solutions because they focus exclusively on commissions, rep motivation, and incentive management.
We recommend developing a clear (successful) commission structure before automating. Once you have established a working incentive program, sales commission software will help you automate everything and increase your commission agility. Armed with full clarity regarding commissions, configuration will be a breeze.
It is also critical that your source data be complete, accurate, and up-to-date. Otherwise, garbage in will result in garbage out – never a good idea when calculating commissions. Finally, all commission software requires some degree of discipline in terms of managing commissions – after all, you’re still responsible for verifying payouts and cutting checks.
In our experience, the most successful companies use simple and transparent commission structures. They use commission software to provide real-time access to their payees and automate their commissions. Every day, new organizations leverage Sale Cookie’s advanced capabilities to deliver well-run commission programs to their team. Visit us online to get started!