Why commissions & spreadsheets don't scale together

Vignesh Mallya · 16 October, 2021

If you have heard of the infamous 'London Whale', you know how Excel can breach your trust. You learn how something as popular as spreadsheets can waste time, cost money ($ 6 billion in this case) and invite class-action lawsuits. 

And still, there are those of us that continue our soiree with spreadsheets for commission calculations, manually updating compensation plans, fixing payouts and sweating at audits. But do we know how manual commission tracking is affecting our bottom line? 

This article shows you how manual commission calculations cost so much more than you think and talks about viable alternatives.

Why does manual commission tracking cost more than you think?

1. Commission calculation is complex on spreadsheets

A 30 member sales team, loses approximately 45 man-days per year in commission related tasks. 5%-10% of all commission calculations have errors.

Spreadsheets are often regarded as a flexible, powerful tool for sales ops and financial management. Truth is - they are. But only upto a certain point.  As you begin, it is definitely easy and familiar, so you can get setup & start in no time. However, familiarity and expertise with spreadsheets don't make them the right tool for businesses of all sizes / and complexities, especially not as you scale your sales team beyond the first 20 reps.  As businesses scale, the complexity of commission calculations increase, leading to frequent errors. For example - you may add new teams with different commission rules, and start compensating on newer metrics such as ‘calls made’, ‘invoice calculated’, ‘logos closed’, etc. . Excel may be the right choice for organizations with less than 20 payees and a basic compensation plan structure but is always human-error prone.

2. Compromised leadership

Top brass hardly has time to micro-study individual commission statements every month. It is challenging to get visibility and insight into sales performance during manual commission tracking through spreadsheets. If you are a department head, sales director or a CFOs, you barely find time to review monthly reports summarising total sales and gross profit figures. With their inherent simplicity, spreadsheets fall short of identifying which sales compensation plans are working and which are not. Even aggregate numbers don't represent which compensation plans are most effective at achieving business goals. Sales leaders, in particular, find it difficult to compare the performance of reps working on different compensation plans.‍ 

3. Failure to achieve revenue goals

Sales teams that choose the manual way of commission calculation spend a chunk of their time resolving their commission errors and updating spreadsheets. This means they also spend a lot of time working backwards to fix pay disputes than looking forward to growing the business.  There is a constant risk of losing your most talented sales account executives to misconduct during commission calculations. All this contributes to churn in enterprise sales and negatively impacts the recurring revenue stream.

It's in the interest of the business to keep a sales team consistently motivated. Having a real-time visible spiff is proven to increase these behaviors. Even a 3-5% lift in revenue due to motivation could result in $300-$500 K in add’l revenue for a company with $10 mn ARR. But in the absence of real-time commission tracking, there are chances that reps don't feel motivated enough to upsell, cross-sell, increase deal-sizes, or improve pipeline.  

What is better than manual commission tracking and Why?

Given how sales commission plans are a big sales motivator, keeping them transparent for the teams is important. However, manual commission calculations pave the way for human errors, lack of standardization, and unsatisfied sales reps. Manual commission tracking can be a significant roadblock for businesses trying to scale. The use of sales commission software can automate the complex commission tracking process for good.

1. Complete transparency

A commission tracking software like Elevate allows real-time access to commission statements and other relevant metrics and data for reps. It helps agents figure out what they have earned and how. In fact, clear data segregation helps them calculate how to improve their bottom line to make more. Sales op managers do not spend a chunk of their days manually compiling and distributing end of month commission statements in the presence of real-time data. Reps can just click on the numbers to see the math behind them, and this transparency helps earn their trust. Thus, there is less manual labour involved and better motivation for reps.

In the end, companies can move beyond excel sheets and formulas and the incessant process of sending emails to confirm commission statements and re-align all their focus to old and simple selling.

2. Better productivity

Manual commission calculation can be complex. It is time-consuming and paves the way for human error. For this reason, there is a lot of fishiness around manual commission calculation, and reps spend a lot of time double-checking the payout amounts to ensure it is correct. This means multifold time waste and less productivity. In addition, we can humanly do only a certain amount of calculations in a given time frame, which makes it an unscalable process. 

For example, if a manager maintains a spreadsheet for commission calculation, they will have to manually restructure teams, make territory changes or implement new commission plans whenever they need be. 

Automating commission tracking with software means doing all this in just a few clicks. Software is a time-saving, error-free and transparent way of disbursing commissions to reps.

3. High accuracy

Commission miscalculations and lack of transparency can demotivate a rep and make them unhappy, leading to a massive employee turnover. Since manual commission calculation via spreadsheets is error-prone, having software to automate the process is a better recluse. A commission automation software guarantees accuracy and leads to rep satisfaction. 

4. Data insights

Using software for commission calculation helps businesses harness valuable data and use it to optimize the sales commissions. Over 90% of sales leaders don’t use any data while designing sales plans. With the right sales commission tool, sales leaders can identify which plans are working, and double down on them, and also see which ones aren’t. This ensures that your commission plans are backed by data to yield the best results.

Move away from manual commission tracking 

With rising competition in sales, sales teams need to free themselves up from repeat administrative functions to focus more on strategic selling. While sales compensations are the ultimate motivator for reps, automating their calculation and disbursal means easing the workflow and creating a healthy and transparent work environment for agents to thrive.

Growing businesses need a quick and accurate commission calculator to automate commission payouts and support necessary changes to comp plans. Good software will automate calculations and save tons of workload that comes with manual payout processing. This means accurate yet fast commission payouts and happier reps.

Elevate automates commission calculation and payouts, bringing a degree of transparency to the process. It boosts sales productivity with realistic visualizations and helps drive business growth. The easy-to-use interface lets finance and sales operation teams create and manage complex incentive compensation plans. Channel business growth by putting an end to spreadsheet commission management and automate your way to success with Elevate.

Learn moreabout how
Elevate can work for your team

Tired of running your commissions on spreadsheets? Afraid of switching because it may be too costly, or time consuming? Well, allow us to take care of all that, and more.