Configure and use commissions
This unit introduces the steps to set up sales commissions for a sales team that is based on a percentage of revenue or contribution margin. It also describes 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 a sales order is invoiced. When the sales order is being invoiced, the system searches for the related sales representative, item, and customer combination that are set up on the Commission calculation page.
Watch the following video to see a demonstration of 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 to define the commission rate that an employee is paid from a sale and for groups of sales representatives, items, and customers.
The parameters on 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 selected Table, select a customer account. If you selected Group, select a customer group. If you selected All, you do not have 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 selected Group in the Sales rep. code field.
Discount - Specify whether the calculation of the commission for the individual invoice line will be based on the gross line amount (Before line discount) or on the net line amount (After line discount). If you select After total discount, any end discount is deducted from the total commission that is calculated after the line discount. The commission on sales that include line discounts requires that the line discount is not posted independently in 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 is entered 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 created a commission line for a sales representative, specify a date only in the To field if you know that the rate is not 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, agreements are searched for in the following order: at a specific level, such as item, customer, or sales representative; at group level, such as a commission item group; and at a general level, such as all items.
You can set up commission sales group codes in the Sales and marketing > Commissions > Sales groups page and then later assign them to a sales representative by selecting GENERAL in the Action Pane and then selecting the Sales rep. button.
You can also set up commission item group codes and commission customer group codes in the Sales and marketing > Commissions > Item groups and Sales and marketing > Commissions > Customer groups for commission pages and then later assign them to Items and Customers.
When these groups are set up, they can be used as a selection in the Commission calculation page when a commission structure is defined. You can use the Sales and marketing > Commissions > Commission posting page to specify the main account to use when a sales order invoice is generated with a commission transaction.
Scenario for customer group for commission:
At Contoso, all customers in the retail market are in one customer group for commission. The sales manager set this up based on the theory that the same type of sales technique and effort would be used for all retail customers. Therefore, the customers should be compensated by using the same commission structure.
Scenario for item groups and customer groups for commission:
At Contoso, the Sales manager wants to encourage sales to a set of customers in a new market. Therefore, to include these customers in a commission calculation with an increased commission rate, a customer group is created for all who belong to this market sector. The same scenario applies to customer item groups if you are encouraging the sale of a group of items.
Scenario for item group for commission:
At Contoso, all receivers are in one item group for commission. The Sales manager, used 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 should be compensated similarly.
Scenario for 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 trying to divide each commission according to the circumstances of that sale, the sales manager splits the commission among the team.
You 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 this warning is ignored, and an overallocation is required.
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 see the commission transaction on a sales order invoice, select INVOICE on the Action Pane, and under the Journals field group, select the Invoice button to open the Invoice journal page, and then select the Commission transactions button.
If a customer decides to return an item for credit, the sales transactions that were created from the sales order are credited. If commission transactions are set up to be created for the sales order, these are also credited when the return order is invoice updated.