Commissions

Commission rules calculate what is owed to a salesperson, an agent or a partner on a transaction.

Choose the basis carefully

Commission can be calculated on revenue or on margin, and the choice changes behaviour rather than just arithmetic.

• On revenue — simple, and it rewards discounting. A salesperson maximises commission by closing volume at any price.
• On margin — harder to explain, and it aligns the salesperson with the business. Discounting costs them too.

Where margin is available — and with stock valuation storing consumed cost, it is — margin is usually the better basis. Its one requirement is that costs are accurate, because a wrong cost now changes somebody's pay.

When commission is earned

Decide whether commission arises on order, on despatch, on invoice or on payment, and configure that point deliberately. Earning on order is generous and creates clawback when orders cancel. Earning on payment aligns with cash but delays the reward well past the effort.

Credits and clawbacks

Credit notes must reverse commission. If they do not, a cycle of orders and credits pays commission on business that never happened, and this is a well-known way for a commission scheme to be gamed. Confirm the reversal path exists and test it with a full credit and a partial one before going live.

Splits

Where several people share a sale, splits should total 100% and be recorded on the transaction rather than worked out later. A split agreed in conversation and applied at payment time is a dispute waiting to happen.

Make statements visible

Let people see their own commission as it accrues. It reduces queries, and it surfaces configuration errors quickly — a salesperson checking their own figures is the most motivated tester a commission rule will ever have.