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Sales Commission Calculation in Spreadsheets

Sales Commission Calculation in Spreadsheets: Do’s & Don’ts

When you use on-target earnings (OTE) in your business’s compensation plan, your sales reps have an idea of what they’ll be able to earn if they meet their targets which, in turn, keeps them motivated. Moreover, using OTE makes it easier for you to forecast sales commissions and manage your business’s finances better.

The thing is, to get all these benefits, the commissions you pay to your sales reps should be calculated correctly. If they are, you’ll stay on top of your finances and your reps will be able to rely on your calculations to get paid what they should. 

Now, the immediate question is whether you’ll be able to use spreadsheets to manage and calculate commissions. And here, the answer is you can but you should be mindful of their limitations, especially as your business, and your sales team, grows. 

In this post, we’ll look at these limitations in more detail and show you when you’ll be able to use spreadsheets for your commission calculations. As a bonus, we’ll also include spreadsheet templates you can use to calculate commissions. 

sales sheet

Why Use Spreadsheets for Commission Calculations?

For years, spreadsheets have been a go-to tool for many businesses to not only work with financial data and documents but also store, manage, and visualize their business data. 

There are several reasons for this, including:

Cost

Compared to a few years ago, spreadsheet software is easily available and, most of the time, you’ll have access to this software for free. Also, there are a variety of platforms available, so you’ll be able to choose one that fits your specific needs and requirements whether it’s Microsoft Excel, Google Sheets, or many others. 

Versatility

One of the main benefits of spreadsheets is that they’re so versatile. You can customize any spreadsheet to your unique needs and, with the ability to use complex formulas, functions, and other features, you can create any type of document with a spreadsheet including financial documents, calendars, planning documents, budgets, and many more. Moreover, spreadsheets are easy to incorporate into any workflow.

Minimal training

Let’s face it, almost anyone knows how to use a spreadsheet. In turn, this means that you’ll likely not need extensive training to effectively use a spreadsheet. Keep in mind, though, that, when you start using complex formulas and functions, you might need to do some research to learn how they work and how they’re implemented.

Data manipulation and analysis

Spreadsheets make it easy for you to manipulate and analyze data. For example, by using formulas, you can add, subtract, divide, and multiply. In addition, you’ll be able to create pivot tables, search for data, combine data, remove duplicates, and use tools for filtering data. 

Data visualization

Once you learn how to work with graphs and charts in spreadsheets, you’ll be able to easily visualize your business’s data. In turn, this allows you to get insights into your business is data and make better data-driven decisions.

The aforesaid are just some of the benefits of using spreadsheets in your business and the other possibilities for using spreadsheets are basically endless.

sales commission calculator

4 Free Sales Commission Calculation Spreadsheets

Considering the above, spreadsheets are a good place to start when you want to track and calculate sales commission, especially if you’re working with just a few sales or sales development reps. But now the question is: Where do you start?

Fortunately, we’re here to help and we’ve prepared 4 templates you can download, and use based on your business’s specific sales commission structure.

Fixed Revenue-Based Commission 

With this template, you’ll be able to calculate commission based on a fixed revenue-based commission structure. As such, it calculates sales commission by multiplying revenue by a specified commission rate. For example, if a sales rep generates $1000 in revenue and works on a commission percentage of 5%, the spreadsheet will return $50 in sales commission.

To work with this template, you only need to enter a sales rep’s name, the revenue they generated, and their commission percentage. Based on these figures, the spreadsheet will calculate the sales commission payout for the specific rep.

You can download this template HERE. (coming soon)

Fixed Profit-Based Commission 

This template works a lot like the fixed revenue-based template mentioned above, with the only exception being that it adds a column for cost in order to calculate the profit every sales rep generated. So, for example, if a sales rep generated revenue in the amount of $1000 with a cost of $500 and works on a commission percentage of 5%, the spreadsheet will return $25 in sales commission. 

To work with this template, you’ll only need to enter a sales rep’s name, the revenue they generated, a cost, and a commission percentage. Based on this information, the spreadsheet will calculate the sales commission payout for the specific rep.

You can download this template HERE. (coming soon)

Variable Revenue-Based Commission 

With this template, you’ll be able to calculate a sales rep’s sales commission payout based on a variable rate of commission. To do this, it performs a lookup to determine the commission percentage based on the revenue the rep generated. Keep in mind, though, the template is based on awarding higher commissions for higher sales figures, but you can change it according to your specific needs.

To work with this template, you’ll only need to enter a sales rep’s name and the revenue they generated to automatically calculate their sales commission payout. 

You can download this template HERE. (coming soon)

Variable Profit-Based Commission 

Similar to our earlier profit-based commissions spreadsheet template, this template takes into account a cost to calculate the profit a sales rep generated. It then performs a lookup in a table of commission percentages to determine the appropriate commission percentage based on the profit. 

This template thus requires the sales rep’s name, the revenue they generated and a cost to automatically calculate their sales commission payout.

You can download this template HERE. (coming soon)

 total sales

Why Not Use Spreadsheets To Calculate Sales Commission?

As mentioned earlier, spreadsheets are a good place to start if you want to calculate and track sales commissions. However, as soon as your team grows two more than just a few sales reps, their limitations will start to surface. And when they do, it might be a good time to reconsider using spreadsheets for your sales commission calculations. With that in mind, let’s look at some of these limitations in more detail.

Time Consuming

One of the major drawbacks of using spreadsheets to calculate sales commission is that it takes a lot of time and effort. Sure, if you were just working with a few sales reps, this isn’t necessarily the case. But as the number of sales reps increases, you’ll find yourself scrolling through hundreds of columns to manage your sales reps’ commissions. 

Also, for every pay period, you’ll need to create a new spreadsheet to calculate the sales commission for the specific period. As such, you’ll need to copy all the sales records into the new spreadsheet together with the formulas and tables needed to calculate the commissions and make provisions for any adjustments. 

excel skills

Distribution Challenges

Once you’ve created a new spreadsheet for the new pay period as mentioned above, copied over all the data, and calculated the commissions, you’ll need to generate a copy for every sales rep.

The first problem here is that your, typically, not able to generate spreadsheets in bulk. So, you need to generate individual spreadsheets for every sales rep. Once generated, you’ll also need to delete information from the spreadsheets that the reps shouldn’t find in their copy. 

Ultimately, this means that reps have to wait significant amounts of time to get insights into their sales commission calculations and it leads to a lack of transparency in commission calculations.

No Visibility for Reps

Flowing from the above, another problem is that your sales reps won’t have any idea of how much sales commission they’ve earned until they receive their payouts. In other words, reps don’t have any real-time visibility into their commission calculations. As such, they need to rely on their own calculations to determine how much they’ll earn in commissions. 

Often, reps’ calculations are off the mark and, in reality, they’ll earn less than they expected. This can lead to a loss of motivation disputes with reps and a lot of wasted time as they try to figure out whether their sales commission calculations were right. 

Another problem with a lack of visibility is that reps aren’t able to see how they’re performing throughout the pay period, with the result that they can’t implement the necessary strategies or make changes to meet their targets.

excel table

Lack of Integration

Although it’s certainly possible to integrate spreadsheets with some of the other tools you already use, this will more than likely not be the case. 

The first problem is that spreadsheets don’t offer any native integration with other business systems, and you’ll need to use integration tools that make these integrations possible. If no integration is possible, you’ll need to copy commission data manually to other systems and platforms. 

Another problem is that spreadsheet columns often don’t match the input fields of other software and business systems which leads to integrations errors if you transfer data from your spreadsheets to other platforms. 

Calculation Errors

Because you’ll likely copy data to and manage it manually in sales commission calculation spreadsheets, they will be prone to errors. Likewise, with the complex formulas, you’ll use, one incorrect piece of data will impact your entire calculation. Moreover, spreadsheets are notoriously challenging to troubleshoot which means that, if there’s an error, you’ll spend hours trying to find it. 

Ultimately, this leads to overpaying or underpaying which, in turn, could lead to disputes with your sales reps or, even worse, a loss of motivation. 

Spreadsheets Don’t Scale

As mentioned earlier, spreadsheets can work for sales commission calculations if you only have a few reps. However, they don’t scale well at all. So, as your team grows, your commission management will become more labor and time-intensive. Another problem is, the more data and formulas you work within spreadsheets, the more prone to errors they’ll be.

exact match

The Solution

As your sales team grows, how do you eliminate these challenges of using spreadsheets? It’s simple, you’ll need to use a platform that’s scalable and allows you to move away from spreadsheets and automate your sales commission calculations.

And this is where Performio comes in. Performio was built by sales comp experts for sales comp professionals. With more than 15 years of deep sales comp experience across hundreds of customers in dozens of industries, our product strikes the perfect balance between flexibility and ease of use.

At Performio, we love helping businesses reduce the pain of calculating and managing sales commission, so they can spend more time on growing and serving their customers. To find out more about Performio or how it can help you, contact us today to discuss your unique needs. 

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