Set up commissions
This unit introduces the steps to set up sales commissions for a sales team. The program bases the sales commissions on a percentage of revenue or contribution margin. The following sections also describe how to inquire on the calculated commissions from posted sales transactions and item returns.
Supply Chain Management calculates sales commissions at the sales line level when you invoice a sales order. When you're invoicing the sales order, the system searches for the related sales representative, item, and customer combination that are set up on the Commission calculation page.
The following video demonstrates how to set up sales commissions.
You can use the Sales and marketing > Commissions > Commission calculation page to set up relationships between the combinations of items, customers, and sales representatives. These relationships help you define the commission rate that an employee is paid from a sale and defines the commissions for groups of sales representatives, items, and customers.
The parameters on the Commission calculation page are:
Customer code - Select whether the commission agreement applies to one customer, a customer commission group, or all customers.
Customer relation - Select the customer account or customer group, depending on the selection in the Customer code field.
If you select Table, you need to select a customer account.
If you select Group, you need to select a customer group.
If you select All, you don't need to select a customer relation.
Sales rep. code - Select whether the commission agreement applies to a commission sales group or all sales representatives.
Sales rep. relation - Select the sales representative group if you select Group in the Sales rep. code field.
Discount - Specify whether to base the calculation of the commission for the individual invoice line on the gross line amount (Before line discount) or on the net line amount (After line discount). If you select After total discount, the program deducts any end discount from the total commission that's calculated after the line discount. The commission on sales that include line discounts requires that you don't post the line discount independently on the Ledger page.
Basic - Specify whether the revenue or margin should be the basis for the calculation of the commission.
Commission percentage - Specify the percentage base with which to calculate the amount of the commission. Together with the calculation method in the Discount parameter, the percentage basis that you enter in this field calculates the size of the commission.
From - Enter the starting date of the current commission agreement. Together with the ending date in the To field, this date range is the period of validity of the commission agreement. If these fields are blank, the agreement is valid for an unlimited period.
To - Enter the ending date for the current commission agreement. Together with the starting date in the From field, this date range is the period of validity of the commission agreement. If these fields are blank, the agreement is valid for an unlimited period. If you create a commission line for a sales representative, specify a date only in the To field if you know that the rate isn't valid after a fixed date.
Find next - Select this option to look up more commission rates for the current invoice line. When you calculate commission, the program searches for agreements in the following order:
At a specific level, such as item, customer, or sales representative
At group level, such as a commission item group
At a general level, such as all items
You can set up commission sales group codes on the Sales and marketing > Commissions > Sales groups page and then later assign them to a sales representative by selecting General on the Action Pane and then selecting the Sales rep. option.
You can also set up commission item group codes and commission customer group codes on the Sales and marketing > Commissions > Item groups page and the Sales and marketing > Commissions > Customer groups for commission page. Then, you can later assign the group codes to Items and Customers.
When you set up these groups, you can use them as a selection on the Commission calculation page when you're defining a commission structure. You can use the Sales and marketing > Commissions > Commission posting page to specify the main account to use when the program generates a sales order invoice with a commission transaction.
Scenario - Customer group for commission
At Contoso, all customers in the retail market are in one customer group for commission. The sales manager sets up this parameter based on the theory that the company would use the same type of sales technique and effort for all retail customers. Therefore, the company should compensate the customers by using the same commission structure.
Scenario - Item groups and customer groups for commission
At Contoso, the sales manager wants to encourage sales to customers in a new market. Therefore, to include these customers in a commission calculation with an increased commission rate, the sales manager creates a customer group for all who belong to this market sector. The same scenario applies to customer item groups if the sales manager wants to encourage the sale of a group of items.
Scenario - Item group for commission
At Contoso, all receivers are in one item group for commission. The sales manager uses the same reasoning for setting up these groups as they did with customer groups for commission, where similar items require similar sales technique and effort and the company compensates similarly.
Scenario - Sales groups for commission
At Contoso, sales representatives frequently work in teams. For example, three sales representatives are assigned to a specific geographical area, and each sales representative can interact with a customer several times before a sale succeeds. Instead of dividing each commission according to the circumstances of that sale, the sales manager splits the commission among the team.
The sales manager can allocate percentages of less than 100 percent and more than 100 percent. If the amount is more than 100 percent, a warning appears. Supply Chain Management correctly calculates the amount if the sales manager ignores this warning, and then it requires that the sales manager completes an overallocation.
View commission transactions
You can only view commission transactions that are financially updated, which means that the status of the sales order is Invoiced.
To view the commission transaction on a sales order invoice, select Invoice on the Action Pane. Under the Journals field group, select the Invoice option to open the Invoice journal page, and then select the Commission transactions option.
If a customer decides to return an item for credit, the system credits the sales transactions that were created from the sales order. If commission transactions are set up to be created for the sales order, the system also credits these transactions when the return order is invoice updated.