How do the Sales Reps & Commission Management Work?

Setting up Sales Representatives and optionally awarding Commission.

Written By Gerry Mckeown ()

Updated at April 25th, 2018

1.     Introduction:

You can set up Sales Representatives within the system and also have the system track their Sales performance and calculate the Sales commission due to them based on this performance.  Since the basis of Sales Commission and Rates is related to Product sales, this feature is predicated on at least the use of the Product Price facilities within the system, if not the full Inventory/Stock Management suite.  Only Sales Invoices and Sales Credit Notes contribute to the calculations (as is also the case with Sales Analysis Reporting), so care should be taken in regard to the matter of Discounts, Rebates, and so on, to ensure that, where relevant, Credit Notes are used to ensure proper recording and reporting of Nett Sales rather than the use of Journal Credits. 

When re-allocating Products or Product Groups and/or changes of Commission Rates, you should also be aware that this will only affect future transactions and calculations and will have no impact on transactions retrospectively.

Sales Reps and the Item Groups (Product Groups) which they sell are the main drivers of the system – that is to say that Product/Service Groups are what determine the Commission Rates and Amounts applicable to each Sales Rep.  So, it is first advisable to ensure that your Products are properly assigned to their relevant Product Groups in the first instance using the Codes Maintenance facilities. Refer to the Article entitled “How do I Use Code Maintenance to Control the Behaviour of the System” for details.

Products (whether just Service or full Inventoried Items) are set up using the facilities of the Inventory Management System - full details of which are contained in the article “How do I Maintain Products and Services Type Items (Sales)”.

2.     Setting up Sales Reps and Commission Rates:

You can find the Sales Rep. maintenance program here;

Click on the highlighted entry to invoke the Sales Rep maintenance program below.  In the top part of this window you set up the Sales Reps’ demographic details;

And, once entered, the bottom half of the screen now displays all of the Product/Item Groups you have set up, including one for Items which remain unassigned to any Group.  If you add further Items and Item Groups later on, they will appear here and you should return to this program in order to update them as regards commission rates for each Sales Rep.

You can allocate Sales Reps to individual Customers here;

Or you can over-ride this default Sales Rep and nominate another one at the time of Invoicing here;

Sales Reps’ commissions can be calculated in two different ways;

   Fixed Percentage Based:  The commission is a fixed percentage of the total net sale value (after Discounts and before Tax) of the value of the particular Invoice Line Item (Product).  For example, if the Invoice Line value is £100 you can specify that the Sales Rep should earn and accumulate a nominated percentage of that value. Obviously, the commission % rate is dependent on the Product Group in to which the Line Item (Product) falls.  The previous “Joey” screen shows different rates of commission being applied to different individual Products which fall into different Product Groups.

Or,

>    Margin Based:  In this case the commission is calculated as a percentage of the gross profit margin earned on the sale of that Invoice Line Item.  The commission is calculated based on the discounted sales value less the calculated costs of the Item.  If you choose this option you can also set up different commission rates to apply to multiple margin bands.  This allows you to scale the commissions earned relative to the amount of margin achieved.  For example, you might have a 3% commission on a sale which has a 25% gross margin or a 5% commission on sales that achieve a 40% margin.

3.     Fixed Percentage Base Commissions:

This first example of a Fixed Percentage sale shows an Invoice for “Bath Salts” belonging to Product Group “Cleansing” being sold at a 10% Discount to the Customer who is on “Standard Pricing” at a Unit Price of £4.56 before a 10 percent Discount on the sales value;

The Sales Rep Commission Report (Go To > Reports > Report’s Manager > Sales Reports > Sales Commissions Report) for the period in question then shows the following;

4.     Margin Based Percentage Commissions:

Turning to the second basis of Commission awards – i.e. those based on Margin calculations – there is an option to vary the Margin Commission % depending on the amount of Margin attaching to the Invoice Line Sales amount.    This allows you to scale the commissions earned relative to the size of the margin achieved on the sale.

Clicking “Add/Edit Bands” creates a new blank record for you to record a new band.

In this example we have created three Margin Based Commission ranges for up to 30% Commission at 5%, up to 40% Commission at 8% and are about to “Save” a band of up to 50% at 10% and beyond.

And, as you can see, we can mix both the Fixed Commission and Margin Based Commission for different Product Groups even within a single Salesperson’s commission structure.

This second example is of an Invoice which is subject to Sales Commission based on the Margin.

In this instance, the Sales Rep Commission Report (Go To > Reports > Report’s Manager > Sales Reports > Sales Commissions Report) for the period in question then shows the following report which includes one sale based on the Fixed Commission basis and another based on the Margin Commission basis;