Accounting Best Practices, Fifth Edition

Chapter 8. Commissions Best Practices

The application of best practices to commissions hardly seems to be worth a separate chapter; however, there are a surprisingly large number of actions that can streamline the calculation of commissions and their payment to sales personnel.

This chapter contains 12 best practices, and the main factor to keep in mind is that they are designed to improve the operations of the accounting department only. Though none of them will worsen the systems in the sales department, the other area that is directly impacted, they may have an opposite impact on the morale of that department. For example, one best practice is to replace convoluted commission structures with a simplified model. Though this will obviously lead to easier commission calculations by the accounting staff, it may also have the negative impact of reducing the sales incentive for those salespeople who are no longer receiving such a good compensation package. Accordingly, before installing any of the following best practices, it is a good idea to first gain the approval of the sales manager to any changes that will directly or indirectly impact the sales department.