If you’re associated with the sales line, you must have been familiar with the term ‘Sales commissions.’ It is the extra amounts of money that salespersons get above their salaries. Like other employees, salespersons are also paid fixed salaries by the company authorities. Apart from the fixed salaries, salespersons receive extra compensations named as commissions. Generally, a salesperson gets commissions based on the number of sales he makes. Besides that, the overall amount of sales also determines the commissions that a salesperson receives. In this article, we will discuss different aspects of sales commissions elaborately.
How are sales commissions calculated?
Generally, there are four main methods of calculating sales commissions.
Straight commissions
In this type of commission, the companies’ authorities don’t offer employees basic or fixed salaries. Instead, the salespersons are directly offered commissions for the sales they make. Paying these commissions to the salespersons reduces the overhead costs and extra expenses of the companies and firms.
Base plus commissions
Several companies and firms offer these types of commissions to the salespersons to motivate them better. In such cases, salespersons are paid fixed amounts every month as base salaries. In addition to the salaries, they receive incentives according to the sales numbers. While the base salaries ensure stabilities to the salespersons, extra incentives or commissions make them work more enthusiastically.
Draw against commission
This type of commission allows the salespersons and the employees to lend specific amounts from their company authorities. Later on, when they make sales and achieve commissions, the lending amount gets deducted from their commissions. In simple words, employers pay specific amounts to the employees even if they can’t make sales. Afterward, when they become able to makes sales, the borrowed amounts get deducted from their sales commissions.
Graduated commissions
The graduated commission method ensures that the salespersons’ commissions get increased after they make specific amounts of sales. In this case, employers predetermine a limit of sales amount, and when the salespersons exceed that limit, their commissions get increased automatically.
These are the main methods that most companies and firms use while determining commissions for salespersons. As mentioned before, not only make salespersons work more enthusiastically but also increase their productivity. There is no doubt that commissions motivate salesforce up to some extent.
The positive and negative impact of sales commissions on sales
The positive impacts are:
- Sales commissions motivate salespersons to turn more leads into sales. The rates of commissions directly impact the performances of salespersons. As the commission rate goes higher, salespersons push more challenging to get more sales. In that way, your employees bring more profits to you.
- As you increase the rates of sales commissions, you can hire more dedicated salespersons who can increase your business’s profit.
- While paying commissions or incentives to your employees or salespersons, you reward their performances. That makes them bound to deliver better performances for getting more rewards.
- Enabling sales commissions can help you in eliminating the extra expenses of your company. As you pay straight commissions to the salesperson of your company, you pay for their performances. That’s a great way to cut off overhead costs indeed.
The negative impacts of sales commissions
- The salespersons of your company might become aggressive and rude in terms of generating more sales. The greed for extra commissions can cause massive behavioral changes in your employees.
- Not all employees are efficient enough to deliver a higher number of sales. Sales commissions might differ from employee to employee, and lower sales commissions might demotivate employees as well.
- As salespersons don’t receive fixed amounts every month, they might get skeptical about job security and might not work in proper ways.
The main challenges of automating sales commissions
It becomes more challenging for the administrators and HRs to calculate the commission of each employee individually. That’s why automated incentive solution software has come into play. Most reputed companies are hiring such software for calculating the commissions of the salespersons in effortless ways. You can automate the sales commission calculation process by enabling such software as well. However, you might have to face some problems as you automate your employees’ calculation. Here we are mentioning the main challenges that might come in your way to automate your employees’ calculation.
- A wide range of elements in incentive plans makes the calculation procedure way harder. Most companies include different types of features in their incentive plans. It gets hard for an automatic sales commission calculation software to calculate the salesperson’s commissions by analyzing all the incentive features.
- The accuracy of such software can be a big concern for you. Frequent refund requests, and reassignments can cause problems while you’re calculating the commissions of your employees using the software. These things can make the software produce inaccurate results.
- Integrating sales can be problematic in mergers and acquisitions if you’re planning to automate the sales commission calculation of your company.
- Keeping track of the sales data and consolidating that won’t be done as promptly by software can be done by a human representative.
How can our software be helpful for you?
- Our professionally-designed True SaaS Software provides accurate results and generates regular log reports of your company’s sales.
- Ease of use is one of the key benefits of our software. We will enable customizations to make the software deliver the performance that you want. The administrators of your company will find it very comfortable to use this software for calculating.
- This software has a dedicated sales data monitoring tool that processes all the refund requests and order cancellations efficiently.
- We have included a powerful SPM management tool in the software to integrate your company’s sales during mergers and acquisitions.
These are the benefits that you can get from our sales commission calculating software. Automate the process of calculating sales commissions of your employees to avoid inaccurate results and calculation-mistakes.