Suppose that you have cumulative tiers like this:
Next, assume that one payee had $1000 in total sales.
It’s quite easy to calculate the commissions from this $1000 total amount:
- From $0 to $100, apply 0% over the first $100 portion = $0
- From $100 to $200, apply 5% over the next $100 portion = $5
- From $200 to $500, apply 7% over the next $300 portion = $21
- From $500 to $1000, apply 9% over the next $500 portion = $45
The commission over the entire $1000 amount is $76, and it was not particularly difficult to calculate. Here is how we sliced the $1000 total amount based on the tiers above:
This gets a lot harder if you have multiple deals. For example, consider the following 4 deals (in chronological order).
- Deal #1 is worth $30
- Deal #2 is worth $550
- Deal #3 is worth $150
- Deal #4 is worth $300
Now, suppose that you want to show to your reps what commission they earned on each deal.
Intuitively, Deal #2 will cross multiple tiers. A portion of its $550 will be paid at 0%, a portion at 5%, a portion at 7%, a portion at 9%. This means a blended commission rate. This is very difficult to calculate, especially if you have a lot of deals. Enter our free calculator which does this automatically for you. Internally, our calculator knows how to split the single $550 amount into portions, and apply the relevant tier percentage to each portion.
Let’s enter our deals like this:
Next, click on “Calculate Commissions”:
Awesome! We get correct commission amounts for each deal, and even blended commission rates. We’ll walk you through the math for Deal #2. Deal #2 is worth $550, and follows a $30 deal just before it. Therefore, it should be split into the following portions:
- A $70 portion at 0% = $0
- A $100 portion at 5% = $5
- A $300 portion at 7% = $21
- A $80 portion at 9% = $7.2
If we sum all this, we get $33.20 in commissions, with an effective rate of 6.04%. Our calculator is correct!
Our free calculator lets you calculate per-deal commission amounts using cumulative tiers. Now, you can show your payees what they earned on each deal and progression towards higher tiers. Note that our calculator only works one payee at a time. And it doesn’t handle scenarios such as non-cumulative tiers, variable rates, quotas, splits, etc. All these capabilities and much more can be found within Sales Cookie. Generating commission spreadsheet manually is difficult and time-consuming. Using Sales Cookie, you can automate all this slicing and dicing, and pay your reps accurately and on-time. Visit us online to learn more!