• Automates Sales Commisson Calculations and Payments
• Minimizes Manual Intervention
• Increases SalesRep Performance
• Expedites Customer Payment Cycle

This module is designed to automate the task of processing sales commissions for commissioned sales representatives. Using easy-to-use, on-line parameter setup screens, the Sales Commissions module interfaces to the Order Entry, Accounts Receivable, Accounts Payable and General Ledger modules.

The parameter setup screens provide a means to update simple-to-use mathematical parameters which are predefined by Sales Management. As management becomes more experienced in using the system, additional calculations can be introduced for increased control and accuracy.

Order Entry Interface

Order Entry is a required module for the processing of sales commissions. While the Accounts Receivable module is not required if sales commissions are to be automatically processed for payment based upon the receipt of customer payments.

Accounts Receivable Interface

The Accounts Receivable module is required to print sales commissions. However, Accounts Receivable is required if sales commissions are to be automatically processed for payment based upon the receipt of customer payments.

Accounts Payable Interface

The Accounts Payable module is required if sales commissions are to be automatically paid by the system as they come due An Accounts Payable check is the means by which the sales commissions due are paid to the sales reps, unless a rep is paid manually.

General Ledger Interface

The General Ledger module is not required to process sales commissions. If the General Ledger module is implemented, commission entries will generate journal entries for commissions payable and commission expense transactions. Order Entry will automatically generate summary journal entries when a shipment is invoiced.

Sales Commission Parameters

Each sales rep must first be defined as to whether they are eligible to receive commissions. A default commission rate can be optionally identified on the Sales Rep Master, although this can be overridden at the order and item level.

If sales commissions are to be automatically generated via Order Entry, the sales reps and override commission rates can be predefined (or eliminated) by customer shipping address. The sales reps and the default commission rates can be overridden for a particular order. The commission rates can be further overridden at the order line item level. Commissions can be eliminated or the commission rates can be overridden for a customer contract, a customer discount schedule or for a given item.

Split Commissions

Sales commissions for an order may be divided between the primary and secondary sales reps. The standard split commission ratio can be predefined; however, standard splitting can also be overridden for each order.

Commission Calculation

There are three methods for calculating the sales commission for a shipment. The commission can be based on the Shipment Value of the commissionable line items, the Combined Profit Margins of the commissionable line items or on the Individual Profit Margin of each commissionable line item.

Shipment Value: When the commission is based on the Shipment Value, it is calculated by accumulating the commission amount of each commissionable line item on the shipment. The commission amount is calculated as the discounted unit price of each line item (less the unit freight for the line item when freight is prepaid and not billed to the customer) times the quantity shipped times the line item commission percentage times the commission split factor, if applicable, for all commissionable items shipped.

Combined Profit Margins: If the commission is based on the Combined Profit Margins of all commissionable line items shipped, it is calculated by first adjusting the cost of the commissionable line items shipped by the freight-in cost percentage, if applicable. Similarly, the revenue for the shipment is reduced by the freight charge for the shipment when the freight is prepaid and not billed to the customer.

The Profit Margin for the shipment is then computed and compared to the minimum Profit Margin for a shipment to determine whether it qualifies for commission. If the Profit Margin for the shipment is greater than or equal to the minimum Profit Margin, the commission amount is the profit for the shipment times the commission percentage for the order times the split commission factor, if applicable.

Since this method uses the commission percentage for the order to calculate the commission, the commission percentages for the line items are not applicable and neither system nor manual line item overrides are available.

Individual Profit Margin: If the commission is based on the Individual Profit Margin of each commissionable line item shipped, it is calculated by first increasing the cost of the line item by the freight-in cost percentage, if applicable. Similarly, the revenue for the line item is reduced by the freight for the line item when the freight is prepaid and not billed to the customer.

The Profit Margin for each commissionable line item shipped is then computed and compared to the minimum Profit Margin to determine whether the line item qualifies for commission. If the line item Profit Margin is greater than or equal to the minimum Profit Margin, the commission amount is the profit for the line item times the line item commission percentage times the split commission factor, if applicable, summed for all commissionable line items shipped.

Payment Methods

Sales commission payment processing can be initiated by the invoicing program for the Shipment Value of the invoice, or by the Cash Receipt Processing program after the cash receipts have been posted to the customer accounts by Accounts Receivable. These payment methods are not mutually exclusive; therefore, a predefined percentage of the sales commissions can be specified for each method.

Lost Commissions

An optional ‘grace period’ can be defined for a sales rep that is paid commission based on the receipt of customer payment. The grace period is defined in days to be added to the due date of a customer invoice in order to determine the grace period cutoff date. The rep will lose the commission if the customer invoice is not paid by the cutoff date. The grace period can be adjusted or eliminated by sales rep.

General Ledger journal entries are generated to reverse the original journal entries for the amount of the lost commission.