Skip to Content
Author's profile photo Former Member

Role of a Good Commission System in driving Profitability of a Company

Commissions and Incentives are an integral part of any company’s day to day operation which is involved in sales. In this blog we’ll see the role of underlying Commission Management system (an area that is often overlooked) in rapidly changing business scenarios.

We’ll also see how a good Commission system can be a game changer in driving your sales force motivation levels. It is then left for no one to guess that how a happy\ motivated sales force can boost the sales and profitability levels of a company.

Following are the 3 main factors which should be considered while choosing\ designing your Commission System:

Hypothesis of   ChangeBusiness changes daily; New products are launched; correspondingly new sales and marketing strategies are developed. One and most important outcome of them is devising a Commission Structure for agents, involved in sale of these new products. This involves configuring different commission rates for agents based on parameters, like in which area the product is to be pushed, what is competitor offering, profit margin on product etc.

                More flexible and robust the underlying commission system is the less time and effort it will take to launch these new commission structures into productive environment; thereby motivating sales force to sell these products and boosting company’s profitability.

Hypothesis of Motivation:  Market is very competitive; each sales organization has its own ways to motivate sales agents for increasing sales volumes. Also, you don’t want your best sales guy to leave your company just because some other company offers extra incentives apart from regular commission.

                Along with regular Commissions, companies have to device various Target linked Incentives Schemes to retain and motivate their lot to achieve their individual target and correspondingly helping in to achieve company’s annual targets.  The commission system should have the capability to create Target linked Incentives Schemes  and ability to set targets at various levels viz. individual, sales channel, sales organization.

Hypothesis of  Transparency and Fairness:  Auditing and Reporting  are core processes;  to ensure trust in your sales team you will have to provide them reports  stating their sales figures, commissions earned on them, commission rates,  commission formula, any incentives linked amounts etc. Also, there need to be a good Audit mechanism to trace back in case of any calculation related errors.

Good Correspondence, Reports from Company to their sales agents and better resolution of any commission calculation conflicts can make a definitive difference in sales agents moral. This can be ensured if the underlying Commission System has capabilities to generate reports based on requirements, the system should have effective versioning mechanism to provide a good audit trail and Integrity of data has to be ensured by Transactions happening on the basis of all or none principle.

So, if we take all of above mentioned hypothesis into consideration, we can easily judge the importance of a flexible and robust commission management system from a company’s operation and profitability point of view.

SAP, has indeed one of the best answer in this area which is Incentives and Commissions Management.

Have a look at solution brief at:

Assigned Tags

      Be the first to leave a comment
      You must be Logged on to comment or reply to a post.