Commissions are a tested and proven motivator for sales teams and are commonly used. They can be in the form of salary plus commission or as the exclusive way for a rep to make money. Commission payments are often scaled based on performance metrics that extend beyond closing a deal such as profit margin, time to close, and as part of a time-based sales quota.
Outside of being a motivator for reps, commission plans give companies important leverage to make lower-risk sales team hires when part or all of a compensation structure is performance-based. If a variable pay rep underperforms, guaranteed base salary may be considered wasted but not as bad as it would be for a salary-only employee that didn’t perform in bringing in new business.
There are some great sales compensation strategy solutions on the market that help companies structure compensation programs and give reps additional visibility. We like Spiff and Xactly – two of the better know solutions out there.
Spiff has some great insights on commission structures that are worth sharing:
- $800 billion will be spent on sales commissions in the US alone this year.
- 10% is the typical percentage of a company’s total budget that is spent on commissions.
- 90% of companies still use spreadsheets to calculate commission rates.
This leads us to believe that commissions are a very big part of business goals for growing companies, but those same companies don’t often spend to optimize the systems that give reps and sales managers that visibility.
Even though we provide a SaaS solution that automates the account receivables process, we still address the same concerns that companies like Spiff try to solve. Our platform enables admins to invite unlimited users and we encourage both sales management and sales reps to have view-only seats. Why? Because we know that visibility into commissions is important for sales performance at growing companies and we have provided eight reasons for that below:
1. Visibility into commissions increases motivation long after the sale is done but well before a payout.
There’s often an interesting time period between when a rep rings the bell on a new deal and when commission money hits the paycheck. Both events are rewarding and motivating for sales behavior. Closing a new customer is the culmination of a sales cycle and the ultimate indicator that a salesperson is doing their job.
But the time between ringing the bell and being able to spend the earned money is long and often dark. Production delays, churns, client problems, slow invoices, and poor follow-up on outstanding invoices can extend that time. Giving both management and people in sales roles the ability to look into the status of invoices can help shed some light and keep motivation high for making new sales.
2. Automation tools will increase productivity for both reps and the finance team
Optimizing your commissions with sales incentive software and an accounts receivable automation solution like HappyAR will rapidly reduce the time that finance team members spend on repetitive tasks. They will also benefit sales team members by removing different, but equally low-value tasks like calculating commission amounts and tracking invoice due dates and allow them to focus on closing deals.
3. Increased visibility helps reduce questions and builds credibility for the company
Your company's goals should include wanting your sales force to sell and your finance team to run that operation well. Consistently fielding questions about invoice payments is a time killer that could also damage relationships between departments. Avoid this by providing seamless visibility into the outstanding invoices that impact the people that will receive payments from them.
Sales reps and management may also grow suspect of finance and company management in some cases. We’ve heard horror stories of company owners being accused of deliberately holding back invoices for commissions that were based on day's sales outstanding. Not a great vibe to have within any company culture and completely preventable with structured and secured visibility.
4. Sales commission visibility helps improve finance accuracy
Mistakes do happen. Sales reps will often have the inside scoop on what was sold, contract value and pricing, and the terms and conditions around these deals. If an invoice is sent out with a mistake, one of the first people that could help spot it is a sales rep with visibility. This will allow you to quickly make adjustments and resend before a client has a negative reaction.
5. You can hire high-performing reps with this innovative reason to work at your company
It’s becoming increasingly difficult to hire and retain top-performing sales reps and sales leaders in this competitive market. In your job posting and during the interview process, let candidates know that your sales organization provides advanced visibility into outstanding commission payouts and explain how. This type of innovation is a clear sign that you care about On-target earnings (OTE), solid incentive places, retention and it ultimately may help attract the top sales talent you need to grow.
6. You give your team the ability to plan their lives better
Sales compensation plans can have a serious impact on when a member of your team is able to access the money that they earned. Having more visibility and knowing where an invoice is sitting can help with short-term financial planning and can reduce the stress that comes with being unaware.
7. The sales team becomes part of the support team
Account receivable team members often find themselves in a position where a second voice would really help things along. Often, the best person for this is the original sales rep who solidified the relationship in the first place. Both the AR and salesperson are motivated by the payment and often it just takes giving them the visibility and including them on the follow-up. The invoice gets paid faster, the commission is released quicker, and the sales rep’s value on the team goes up.
8. You improve client relations and repeat business opportunities
Increasing communication with clients throughout the AR collections process helps strengthen relationships, not weaken them. Clients feel like expectations and directions are clearly communicated with them and you prevent major problems that come with past due amounts. For sales reps, knowing that your clients are happy and on top of a pending payment may give you a great opportunity to reach out to discuss repeat business opportunities that continue the lucrative cycle that get reps paid more and companies growing.
With HappyAR. you can automate workflows, integrate with common accounting software, and gain insight into your customers with in-depth data collection. HappyAR streamlines your invoice follow-up tasks per day and helps you get paid faster.
If you're currently following up on invoices yourself, it's time to stop relying on human memory to check whether customers have paid yet. Past due invoices hinder your cash flow, and you shouldn't be expected to have to remember to check your payments constantly.
To sweeten the deal even further, there's no contract to sign; you're with HappyAR month to month, and you have no long-term commitment to stick with us.
If you're ready to have easier invoicing collections, we're ready to make it happen for you. Contact HappyAR today!