In today’s article, we’ll take a look at the basics of commission calculation, as well as discuss the latest trends that are revolutionizing the process. We’ll show why modern technology – such as commission automation – is key, and we’ll discuss a tool that can help your company reach new levels of efficiency.
Commission calculation basics
A commission is a form of remuneration that can be set in various ways. The most common models are:
- Percentage commission – An employee receives a specific percentage of the sales value. For example, if a salesperson achieves a turnover of $10,000 with a commission rate of 5%, their commission will be $500.
- Fixed commission – A set amount for each unit of product sold. For example, a salesperson may receive $50 for each unit sold.
- Commission gradation – Commission rates change depending on the sales level achieved. For example, a salesperson may receive 5% for the first $10,000 of sales, and 10% for sales above this amount, etc.
Commissions are an important element of the remuneration system, especially in sales departments, where they are the main motivator to achieve better results.
Why are accurate commission calculations crucial for business efficiency?
Commissions are a topic that may seem – after all, calculating a percentage of the price of goods sold is not a problem. However, in practice, this process is often much more complicated and depends on many different factors.
Imprecise commission calculations can lead to a number of problems, such as:
- Demotivated team – Salespeople who receive incorrect or delayed commissions may feel undervalued and demotivated.
- Financial problems – Errors in commission calculations can lead to excessive payments or unpaid liabilities, which negatively affects the financial flow and condition of the company.
- Incorrect efficiency analysis – The accuracy of commission data is of great importance for assessing the efficiency of individual employees and departments. Without reliable information, it is difficult to plan for the future and set goals.
- Lack of transparency and trust – Imprecise calculations and ambiguities lead to a loss of trust in the company and the commission system by salespeople, which in turn leads to employee turnover.
Well-planned sales commission system resembles a well-oiled mechanism – thanks to it, the company operates efficiently, and employees feel that their work is fairly rewarded.
Commission settlement automation – Another fad or a necessity?
In recent years, automation has become one of the main topics in the area of commission management. Some believe that it’s yet another business fad, but reality shows that commission automation is an unavoidable necessity for companies that want to grow and eliminate errors.
Here are the benefits of commission settlement automation:
- Time savings – Automatic systems eliminate manual calculation and data entry. Processes that used to take many hours and involve many people can now be completed in a few minutes.
- Precision – Modern tools reduce the risk of human error. Systems operate on the basis of precisely defined algorithms and rules, which means that the result is always in line with the assumptions and repeatable.
- Transparency – Automation allows for full transparency of the settlement process. Employees can track their results and calculations on an ongoing basis, which builds trust in the remuneration system.
- Scalability – For developing companies, manual commission calculation is becoming an increasing challenge. Automation allows you to handle an increasing number of transactions without additional human resources.
In short, modern commission accounting systems allow companies to optimize the process and focus on strategy, instead of getting lost in tables written on paper or in multiple Excel sheets. How exactly can a solution like MonkeyJar help you and what functionalities does it offer?
Optimizing commission management with MonkeyJar
MonkeyJar transforms sales commission management, making it more precise, efficient, and automated. We designed our platform for companies that need a comprehensive and affordable commission management tool (MonkeyJar is available as a SaaS product and offers competitive pricing starting at $29 per seller per month). Here are its features:
- Settlement model – Automate commission calculation based on fully customizable models, including different sales parameters and billing periods (daily, weekly, monthly, quarterly, semi-annually, and annually) to avoid problems caused by outdated rules and lack of transparency. With MonkeyJar, monthly commission calculations will take hours instead of days and will require significantly fewer employees.
- Data import and integration – Prevent human error by quickly and automatically importing data from Microsoft Excel or Google Sheets. You can also use the API (REST) to send data from MonkeyJar to CRM, ERP, or accounting tools and gather all key information in one place.
- Cloud – MonkeyJar is a web application (the dealer portal MonkeyJar Agent also functions as a mobile app), so you don’t have to install anything.
- Clawbacks – MonkeyJar allows you to automate the calculation and management of clawbacks in the event of changes or refunds. This saves you time and minimizes the risk of problems and disputes resulting from the lack of transparency and high complexity of commission processes.
- Dealer portal – Provide your salespeople with the MonkeyJar Agent platform through which they can access all important data (e.g., information on paid commissions and bonuses, sales history, etc.) and file complaints.
- Sales structure – Use a dedicated module with a graphical interface to visualize and organize the structure of your sales team. This will allow you, for example, to create dedicated commission programs that will positively impact employee motivation.
- Reports – Control data regarding sales agents, sales and commissions using the analytical reporting module. This is a great tool for monitoring the results of specific salespeople or teams.
- Roles and permissions – Define roles (e.g., administrator, settlement specialist, settlement acceptance specialist, etc.) and assign them permissions that will regulate their access to data and the system.
- Security – MonkeyJar offers secure login via Microsoft or Google accounts (single sign-on).
Conclusion: Optimize your commission processes
Commission management is a complex process that requires careful consideration and adaptation to the specifics of the company’s operations. Current trends indicate a growing need for flexibility and personalization of compensation systems, which allows for better adjustment to changing market conditions and employee expectations. Software such as MonkeyJar – flexible, easy to use and rich in useful features such as a dealer portal or corrections support – is a tool you can use to pave the way for better sales team efficiency and improved financial results.
Want to see our platform in action? Contact us now to arrange a conversation!
