If You Think Doing Payroll is Hard, Try Doing SalesCommission Tracking and Payments!

Many organizations today are looking for ways to combine functional areas within their accounting/payroll department to manage costs. One such cost saving is combining payroll processing and reporting with the processing and reporting of sales commissions. In fact, sales commission processing can really be viewed as part of the larger payroll process. Sales commissions must first be agreed upon and usually signed off by upper management to incorporate sales commission payments into the payroll process. At first glance, payroll and sales commissions processing share some common characteristics. They both are very time sensitive in that sales people and employees get nervous when commissions and payroll are not paid on time. There is an expectation that no matter what happens folks get paid on time. It’s like the US Postal Service always delivers the mail regardless of the weather. It’s expected to be there on time! Furthermore, employees and sales people track their pay and commissions to ensure they are paid accurately. If there is a mistake on a pay stub or sales commission statement all productivity comes to a halt until the issue is resolved. Having managed a number of sales teams I can tell you that every good sales person tracks his/her commissions on their own to keep the company commission tracking “honest”. However, there are a number of differences in managing payroll versus managing sales commissions. For example, with payroll, once the payroll process is in place, much of the time is spent on compliance issues. A major portion of compliance is the timely and proper reporting of taxes and deductions from the employees’ payroll. Whether you process your payroll in-house or use a service provider, the company is ultimately responsible to be up-to-date on governance and compliance to ensure local, state and federal guidelines and laws are being met. With sales commissions, the compliance aspect of payroll is replaced with the tracking and reporting of sales commissions to ensure the organization is 100% focused on customers. Ironically, one of the biggest challenges is to understand the commission plan so the commission calculations actually comply with the plan! It’s not uncommon to hear a sales representative state they have no clue how their commissions are calculated but they trust their sales manager is looking out for them. Fortunately, there are tools available for payroll managers to manage the complexities of payroll processing in the areas of compliance and reporting. On the sales commission front, productivity tools have been available for payroll departments to calculate and manage sales commissions. Companies have gone to great lengths to build very complex spreadsheets that map to their company’s sales commission plan. Only recently have new tools become available for payroll managers to create sales commission statements similar to payroll statements that report and track sales commissions. I encourage payroll managers to search for these new tools to help them in their job. After all, like the Post Office you are going to be expected to deliver that commission check rain or shine!