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Sales Commission Tracking

By |2021-08-12T14:28:15-05:00August 10th, 2021|Comments Off on Sales Commission Tracking
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Introduction

Sales and Invoices include a Sales Commission Tracking form where employees are selected to receive a commission. Commissions are calculated by selecting employees on Sales/Invoices and using pre-defined calculation methods. When processing payroll, these employees and their commissions are selected and may be edited or changed prior to the creation of the check.

Step-By-Step

Establish Permissions

  1. Your first need to allow the appropriate user permission to access the commission related forms. From the main menu, click Company | User List/Security.
  2. This action opens the permissions form. Click Next.
  3. Locate the appropriate form and report that your users will need access to. The settings are shown below.
  4. Check the Commission Method, Commission Method List, and Sales Commission Tracking options. These three selections should be sufficient to use this feature. We generally don’t recommend that anyone have permission to delete.

Note: Access to the Assign Commission form is granted when a user has permission to edit Sales and Invoices. We will cover the Assign Commission later in this topic.

Commission Methods

Open the Commission Method List. From the main menu click Employees | List | Commission Method List.

You have seven types of Commission Methods (calculation methods) available to you:

Percentage of Sub-Total: This method allows you to enter a Sales Commission percentage rate. The Sales Commission will be calculated by multiplying the sub-total (total before tax) by the commission rate (percentage). An example might be 10% of the amount sold.

Fixed Dollar Amount: This method allows you to pay a set dollar amount commission for each Invoice or Sale created. An example might be $15.00 per transaction.

Percentage of Direct Cost: This calculation will consider the Average Cost of the item(s). If the Average Cost is null, we will use the Estimated Cost. If Average Cost and Estimated Cost are null, the commission will be zero. This method always uses the Cost filed from the Sale/Invoice. Note: If you pay commissions and later change the Sale/Invoice, this amount may be wrong.

Adjustable: This method allows you to enter a variable dollar amount of commission for each Invoice or Sale created. If there is never a set dollar amount then this commission method would be used.

Percentage of Gross Profit on Materials: This method allows you to calculate commission based off a percentage of the Gross Profit on Materials. This calculation will look at Inventory, Serialized, Non-Inventory, Other Charge and Service type items with an assigned COGS Account and take the Retail Price minus the Item Cost to total the gross profit of materials. (Non-Inventory, Other Charge and Service items must have the checkbox checked within the Item form to allocate both an Income and COGS account. Each one of these items has a labeled checkbox such as, “This item is purchased for and sold to…”).

Percentage of Labor Cost: This method allows you to calculate commission based off a percentage of Total Labor Cost. The Labor Cost is figured by assigned a Labor Cost value to each Item. Only Item Types of Inventory, Serialized, Non-Inventory, Other Charge and Service can have a Labor Cost. (Non-Inventory, Other Charge and Service items must have the special checkbox option checked within the Item to assign a Labor Cost). In order to assign a Labor Cost to items you must enable the Preference within Edit| Preferences| Payroll| Company Preferences tab that says, “Use Labor Cost for Commissions”. To read more about this method please see the help topic called “Piecemeal Pay”.

Percentage of Retail Labor: This method allows you to enter a Sales Commission percentage rate. The Sales Commission will be calculated by multiplying the Total Retail amount of all Service Type items that are marked Labor Only by the commission rate (percentage). An example might be 15% of the Retail Labor Total.

Enter a name that makes sense and a value. Continue to add various Sales Commission calculation methods as needed.

Establish Defaults

Open the Employee’s Payroll Items form.

On the General tab select a Default Commission Method and Default Commission Earning Item. These are default values that will be auto-selected. They can be changed at anytime here or while paying commissions.

We highly recommend that you create a dedicated “Sales Commission” Payroll Earning Item for this purpose. You can call this Earning Item anything you wish, but for tracking and reporting purposes, you will want to have a dedicated Earning Item for this process.

Assigning Commissions

Create Invoices and Sales as usual.

From the Menu button (while in the Sales or Invoice) click the Assign Commission option. A form will open like the one shown below.

Select the Employee. The Assign Commissions will default to the selection made in the Employee Payroll Items. You can change it if needed. For security reasons, the commission amount cannot be changed at this point. Only a user with appropriate payroll-related security permission will be able to change the commission amount and that is done while processing Payroll.

You can assign the same Employee more than once. You might do this if you wish to pay them a commission that involves two or more Commission Methods.

The Paid column indicates whether or not the commission has been added to a Payroll Check.

For convenience, you may also access the Commission Method form from the Invoice\Sales list.

Paying Commissions

Paying commissions is part of regular Payroll. From the Process Pay Group select an Employee and click the Add Commissions button.

Select the various commissions that you wish to pay. You may change the Commission Method, Earning Item, or Commission dollar amount as needed.

Note: Once the commission is paid, it will no longer appear on this list. This is true even if you pay only a portion of the commission.

Proceed with processing Payroll as you normally would. The commissions will appear on your paychecks and be detailed in all of the various Pay-stubs and Payroll reports.

Reports

We have included a report that is located under Reports | Payroll | Sales Commission Tracking.

Important Notes

  • This report displays the commission amount that was originally entered using the Assign Commission form. The actual amount paid to your Employee could be different because you can overwrite this amount when you actually create the Paycheck.
  • The Paid and Check Number columns only appear once the Paycheck has actually been created.
  • If you need more history, use other reports related to the Payroll Earnings Item that you are using to track commissions. From the main menu click Reports | Payroll to view the various Payroll reports.

Tips

  • You have seven types of Commission Methods (calculation methods) available to you at this time. Later updates may include additional methods.
  • Commissions are not calculated on an item by item basis. In other words, you can’t set commissions on individual items. You will need to override the commission amount manually to handle other scenarios. Later updates will likely include the expanded capability.
  • Sales and Use Tax is never considered in commission calculations.

Related Business Articles

The following articles are related to the subject of performance-based compensation. They were written by Aptora’s founder and CEO James R. Leichter. These are just a few of what he has written. Please search “performance-based compensation james leichter” for more articles and information.

https://www.contractingbusiness.com/contracting-business-success/pay-performance-conversation-james-leichter

https://www.contractingbusiness.com/contracting-business-success/contractors-and-staff-win-performance-pay

http://www.hvacrbusiness.com/increase-service-technician-revenue.html

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HVAC Electrical Plumbing Software

Aptora delivers a true All-In-One services software solution including CRM, accounting, payroll, inventory, vendors, sales, marketing, dispatch, flat rate pricing, and more. NO 3rd party plugins or integrations required. Created by contractors for contractors, we know what it takes to grow your services-based businesses.

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