Commission calculation on Manufacturer Rep orders

When you enter into an agreement with a manufacturer to become their manufacturer representative, you negotiate a commission to be paid to you for sales to your customers. When you record the commission payment, it is created as a Manufacturer Rep sales order in Sales Order Entry. The commission rate is calculated on the order based on rates you set up in Sales Manufacturer Commission Setup. Commission rate records should be set up based on the agreement you have negotiated with the manufacturer. They can be based on specific vendors or a single rate applied to all vendors. They can apply to a specific warehouse, product or product type, customer, or territory.

When a search is conducted in Distribution SX.e for a qualifying Sales Manufacturer Commission Setup record to apply to a Manufacturer Rep sales order, the order of the search, or hierarchy, starts very specific then progresses down to very general.

Commission records that are inactive or outside of the start and end dates are not included in the hierarchy review.

This search order is used:

  1. Product type-specific search
  2. Customer and territory search
  3. Vendor and warehouse search

Product type search

The search begins by looking for product-type-specific records based on this hierarchy:

  1. Product
  2. Catalog
  3. Product Line
  4. Product Category

Within each product type search, the following hierarchy is applied:

  1. Vendor and Warehouse
  2. Vendor and Warehouse List
  3. Vendor and no Warehouse
  4. No Vendor and Warehouse
  5. No Vendor and Warehouse List
  6. No Vendor and no Warehouse

When a product type record is found, the record is further qualified by looking at the Customer, Customer List, Territory and Territory List on the record. There is no order to this portion of the record validation. It is just verifying that the product type record can be used if the record contains any specific Customer or Territory settings.

The Territory that is loaded and compared is based on the ordering customer and ship to. If there is a ship to, the Customer Ship To Setup Territory field is checked. If it has a value (not blank), that value is used for the record search. If the ship to’s Territory field is blank, or there is no ship to on the order, the Customer Setup Territory field is checked.

Example

  • Product ABC’s Commission Rate: 18%
  • Product Category ABC’s Commission Rate: 15%
  • Vendor ABC, Product Line ABC’s Commission Rate: 16%

Customer and territory search

If there are no product type-specific records found, then this hierarchy is applied:

  1. Customer
  2. Customer List
  3. Territory
  4. Territory List

When a Customer or Customer List type record is found, the record is further qualified by looking at the Territory and Territory List on the record.

Within each customer/territory-specific search, this hierarchy is applied:

  1. Vendor and Warehouse
  2. Vendor and Warehouse List
  3. Vendor and no Warehouse
  4. No Vendor and Warehouse
  5. No Vendor and Warehouse List
  6. No Vendor and no Warehouse

Example

  • West Territory Company Wide (no vendor, no warehouse) Commission Rate: 18%
  • Vendor ABC, Customer ABC’s Commission Rate: 15%

Vendor and warehouse search

If there are no product type- or customer/territory-specific records found, then the final search hierarchy is applied:

  1. Vendor and Warehouse
  2. Vendor and Warehouse List
  3. Vendor and no Warehouse
  4. No Vendor and Warehouse
  5. No Vendor and Warehouse List
  6. No Vendor and no warehouse

Note the last search in this hierarchy. This represents the most broad of commission records where there is no vendor, no warehouse, and no product type. If your company charges all manufacturer vendors the same commission charge, you may only require a single flat commission rate for all Manufacturer Rep orders. Or, you may set up a single Sales Manufacturer Commission Setup record for all but one vendor who pays a smaller commission due to the volume of orders.

Example

  • Company-wide Commission Rate: 18%
  • Vendor ABC Commission Rate: 15%

Applying Manufacturer Rep order commission to salesreps

To pay a portion of the commission earned for your company on a Manufacturer Rep order to individual salesreps, you can use the standard commission calculation that is based on Sales Commission Setup records. We recommend you set up a commission type in Sales Commission Setup specifically for Manufacturer Rep orders and assign this type to the appropriate salesreps in Sales Salesrep Setup. Then, assign the salesreps (both, if you are paying commission to both your inside and outside salesreps) to the Customer Setup record you created for your manufacturer vendor. Select the Use Salesrep In/Out option in the Manufacturer Sales section on the Ordering view. These salesreps are loaded on the Manufacturer Rep order, overriding any salesreps assigned to the ordering customer’s Customer Setup record.

Use the SM Commission Report to review Manufacturer Rep order sales totals and the commission paid to salesreps for their involvement in placing the order with the manufacturer vendor. After the order is invoiced, the report calculates the commission amount assigned to each line item’s Inside Salesrep and Outside Salesrep.

Your selection for the Calculate Sales Rep Commission From field on the Manufacturer Rep order determines the type of commission calculation. If this option is Earned Commission, the salesrep commission is calculated from the commission amount paid to the distributor from the manufacturer vendor. If this option is Sales Amount, the salesrep commission is calculated from the net amount of the line item. This is no different from the standard Distribution SX.e order commission calculation. The Calculate Sales Rep Commission selection is defaulted from the Customer Setup record created for the manufacturer vendor but can be overridden in Sales Order Entry.

Note: When using the Earned Commission calculation on the Manufacturer Rep order, if the Commission Type on an order line is not based on Net or Gross, and is not a Target Type of Sales Amount, the Manufacturer Rep order is not processed for a salesrep’s commission amount.

All salesrep commissions are calculated after the Manufacturer Rep order is processed in Sales Entry Invoice Processing Report, when you run SM Commission Report in update mode. If commission is not calculated correctly for salesreps based on the commission paid by the vendor, use Sales Maintain Commission Entry to adjust the portion of the commission owed to your salesreps. The total commission amount paid by the vendor cannot be changed after the Manufacturer Rep order is invoiced.

Related topics