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How To Avoid Incentive Compensation Payment Errors

How To Avoid Incentive Compensation Payment Errors

Do you often find yourself poised and ready to hit the "Send" button on the final sales commission payments sheet but you hesitate because of a niggling doubt?

7 Ways To Avoid Sales Incentive Payment Errors

Because, being the sales incentive administrator, you know the cost of getting the sales incentive payments wrong and how it can have a damaging effect on you, your company, the forecasted commission expenses, as well as, your sales team.

  • Your company may lose money from ‘leakage.’
  • The sales team could become increasingly cranky for not getting their expected pay
  • You have to spend hours reworking the numbers on the sheet to find and correct the error.

Incentive payments are designed to increase the performance of your sales team and also drive performance among employees in general. Sales incentive programs have proven to work time and again for many companies, but without effective leadership, diligent sales incentive administrator, and thoughtful implementation, the incentive program might fall short of expectation and might not get the results the company had hoped for.

Preparing sales incentive payments may feel like a bungee jump. You may test the cord a couple of times to ensure it is safe; you think a shot of adrenaline pumping through your veins as you get ready for the jump but can you ever be sure that you'll land safely without hurting yourself?

There are several pitfalls that plague companies when they try to initiate a new sales incentives plan, however, there are some ways to counter these negatives. In the same way, there are many variables in calculating a sales incentive payment that takes the accuracy of a supercomputer to keep track of all the numbers and calculations. You cannot afford to make errors when you're preparing a sales incentive payment sheet. So here is a detailed checklist of seven actions you can take to reduce the risk of a sales incentive payment error.

avoid payment errors

1. Run some smoke tests on total payable

Many administrators tend to overlook the contribution each salesperson makes to the company. Whereas, salespeople mostly rely on their own personal sales achievements to earn their income. If their efforts go unnoticed, there will be a decrease in their morale, as well as, a marked decline in office relationships.

Carefully check your figures and look for possible anomalies. In particular, review:

  • How does the total payable compared to last month?
  • Load the output data from last month’s payroll into your file and run a match.   
  • Check if there are any significant variances? If yes, investigate.
  • How does the total payable compared to the budget?
  • Who are the top 10 earners?
  • Are they the usual suspects or has the person at the bottom of the league ladder suddenly jumped to the top?
check total payable

2. Run a target SUM check

When it comes to calculating incentives for your sales team, it is essential to keep track of employee performance. Many companies do not keep up with this practice on a regular basis. There are a few companies that use spreadsheets to track employees' sales numbers, performance, attendance and other factors, which is still an unreliable practice that is again prone to error.

It is essential to have a sale commission software that helps you streamline and improve employee performance management across the board. The software accurately monitors performance; data is updated daily to ensure all information is up to date. Sales incentive administrators can see individual employee performance, sales charts, department performance, industry trends and quickly check the targets, check for any outlying targets and make sure they add up to the total national target.

check targets sum

3. Run a sales SUM check

A sales commission software can help you manage and track sales commissions. It enables you to implement best practices to motivate your sales force while eliminating all the hidden costs of sales commission incentive management. It also helps you ensure all accruals add up to the national figure based on sales crediting rules. You can quickly do a sum check on your sales incentive file versus the source data you received and check if there is any difference.

check sales sum

4. Run a payees check

Employees come and go all the time. With sales commission software, you can check your details and match the list of eligible salespeople (payees) in the HR system to ensure the correct disbursement of sales incentives.

check payees

5. Run your numbers through a broader approval process

At times you can be so confident about the data you've collected and calculated that it can be difficult to view it objectively. It is highly recommended to run your numbers through a colleague or manager. Getting a fresh set of eyes to review your work can help identify human errors that you might have overlooked. Consider asking your manager to review and sign off on your tests.

run your numbers through a broader approval process

6. Communicate and Send Commission Reports to All Sales Managers

As a sales incentive administrator, it is impossible to know the details of how each sales team has operated during the period. And, just occasionally, salespeople will forget to update systems. To avoid data input or oversight errors, send the commission reports to the Sales Managers and ask them to check if you have all the details you need to calculate the sales incentive payments accurately.

communicate commission reports to sales managers

7. Communicate and Send Your Report to Each Salesperson

Some sales teams may at times be too large for a Sales Manager to keep track of every transaction. Salespeople who are eligible for sales commission can let you know if you have omitted any deals or if their total sales salary is wrong. Ask them to check the file and let you know if any of the figures don’t add up.

communicate commission reports to salespeople

When you carefully follow through with these seven steps, you reduce the risk of errors that can lead to mistrust in plan results and decreased selling efforts on the part of the salesperson because of additional time spent shadow accounting, disputing results, and complaining about the plan. Continuous mistakes in incentive disbursement may also give way to a dissatisfied sales team.

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