Accounting Best Practices, Fifth Edition

8–3. Construct a Standard Commission Terms Table

As salespeople may make the majority of their incomes from commissions, they have a great deal of interest in the exact rates paid on various kinds of sales. This can lead to many visits to the commissions clerk to complain about perceived problems with the rates paid on various invoices. Not only can this be a stressful visit on the part of the commissions clerk, who will be on the receiving end of some very forceful arguments, but it is also a waste of time, since that person has other work to do besides listening to the arguments of the sales staff.

A reasonable approach that greatly reduces sales staff complaints is a commission terms table. It should specify the exact commission arrangement with each salesperson so there is absolutely no way to misconstrue the reimbursement arrangement. Once this is set up, it can be distributed to the sales staff, who can refer to it instead of the commissions clerk. There will be the inevitable rash of complaints for the first few days after the table is issued since the sales staff will want clarification on a few key points, possibly requiring a reissuance of the table. However, once the table has been reviewed a few times, the number of complaints should rapidly dwindle. The only problem is that listing the commission deals of all the sales staff side-by-side on a single document will lead ...