Don’t Let Your Variable Compensation Plan Run into Trouble
Let’s talk about the elephant in the room. Setting up or managing a variable compensation plan at your company has one really big drawback:
You must maintain up-to-date, transparent data.
Updated, easily accessible data not only promotes better revenues, it also demonstrates that your company is honest. It shows that you prioritize your staff’s happiness because you make sure to promptly reward them for their hard work.
Unfortunately, the double- and triple-checking required to prevent typos in manual variable comp processes take so long that they make transparency nearly impossible. In this article, we’ll talk about what makes those processes so complex, and how you can simplify them to achieve greater transparency.
First, Let’s Talk About What Makes a Variable Compensation Plan Hard to Manage
If you’re reading this, we can safely assume that you have quite a few commissioned salespeople who are spread across different geographies. If you’re following best practices for variable compensation plans, we can also assume that each commissioned salesperson has an individualized plan that is tailored to motivate them specifically.
That means that (a) you have multiple plans to manage along with the need for one-off adjustments, and (b) you manage multiple regions, each featuring different legislation for cities, counties, states, and countries. Already, this is complex… but it gets so much worse.
Companies also typically calculate commissions with:
- Multiple payments for one salesperson, such as if they are the sales rep and the sales manager and therefore will have different rates in a single sales document
- Different variable compensation plan awards based on sale, margin, quantity, quotas (AKA accelerators, milestones, thresholds, or tiers over time), margin quotas, or tier-based sliding scales
- Multiple commissionable and non-commissionable salespeople contributing to a sale, requiring split commissions that each have their own variable rates that apply to different salespeople, customers, or products. These may also have different payment timelines, such as for when an invoice is posted, or when it’s paid
- Complications arising from aging invoices, write offs, markdowns, trade or term discounts, varied payment terms, and different incentives for different credit card types
When you have to manually calculate commissions that include some or all of these variables, commissions management suddenly balloons into an exhausting, multi-day task.
Even a single typo can result in a cascade of errors, so commissions processing takes extreme attention to detail and, often, some very late nights. Most reasonable people have no interest in providing timely, transparent insight into a hectic process like that. Would you?
Fortunately, there is a better way.
How to Streamline Your Entire Variable Comp Process, So You’re Proud to Show It Off
If anything in the previous section sounded familiar, you probably cannot imagine having a commissions process that you’re proud to show off. But, with the right setup, you can not only achieve the timely, transparent process your company desires – you can also experience stress-free commissions processing. Really!
Here’s the secret to success:
Automate your commissions process.
When you automate your commissions calculation process, you can finally get error-free tracking, calculations, reporting, and payments. Some systems even empower you to automatically notify salespeople and managers about the progress of their variable compensation plan.
Okay, we have reached another elephant in the room:
Yes, this will require you to invest in variable compensation management software.
If you’re ready to start the software evaluation process, we can help you save time on your research. Download the white paper for this series (coming soon!) so you can access its checklist of The 7 Things to Look for in Variable Compensation Management Software.
Congratulations for Completing the Series! Now, Take Your Next Step…
Now that you have completed the entire 4-part series on how a variable compensation plan can motivate your employees, improve their productivity, and increase their happiness levels, it is time to make your plan. Your Commission Plan, that is.
Companies that rely on Microsoft Dynamics GP can relieve every variable comp headache and complexity listed earlier in this article and ensure that they provide transparent, on-time variable comp data, every time, using Commission Plan for Microsoft Dynamics GP.
Learn More About Commission Plan for Microsoft Dynamics GP
Since 2002, companies across every sector have relied on EthoTech for the right tool for tracking, calculating, and paying variable compensation. We provide solutions, integration, and support that is focused solely on integrated variable compensation software for Microsoft Dynamics GP. It’s all we do, and we do it better than anyone. Contact EthoTech to learn more.