Accounting Best Practices, Fifth Edition

18–5. Commission Policies for Best Practices (Chapter 8)

• The commission calculation system shall not be altered without approval by the chief executive officer. This policy requires high-level approval to make plan alterations, so there is less chance that the sales manager will gradually increase the commission plan’s complexity over time.

  Impacted best practices:

  • Simplify the commission structure

• Commissions shall be paid based only on cash received. This policy supports collection efforts by giving the sales staff a considerable interest in receiving payment for invoices. This approach avoids the use of commission payments based solely on invoiced amounts.

  Impacted best practices:

  • Only pay commissions from cash received