Calculating Advances - Bonus/Commission

This supporting function is used to calculate advances under a bonus/commission agreement (b/c agreement) for one or more recipients. These can follow either a fixed or dynamic method. The two advance payment methods are explained and a detailed example is presented at the end of this document.

Before you start

A Bonus/Commission agreement must be specified with either a fixed or a dynamic b/c advance method. The prerequisites for bonus/commissions are described in Managing Bonus and Commission.

Follow these steps

  1. Settings for B/C Advance Method

    Settings for the advance method are specified for each b/c agreement in 'Bonus/Comm Agreement. Open' (OIS412).

    • Advance Method

      Advances are calculated by either a fixed or dynamic advance method. These methods are explained in the sections Calculating Fixed Advance and Calculating Dynamic Advance.

    • Advance Percentage

      The advance percentage specifies whether the entire or part of a b/c payment is made in advance. This guards against making too large payments in advance.

    • Advance Frequency

      The advance frequency specifies the interval at which advance payments are calculated for b/c agreements, such as every other period or every third period. The period type specified in the b/c agreement indicates the period range, such as a week or a month.

  2. Calculating Fixed Advance

    A fixed advance is recommended for agreements providing immediate payment of bonus/commission without any graduated percentages for generating values.

    Fixed percentages are specified per recipient in 'Bonus/Comm Agreement. Enter Reservations' (OIS414). The advance is calculated by multiplying the paying amount for the period by the fixed percentage. See 'B/C Agreement. Change Recipient Status' (OIS411), which is started from 'Bonus/Comm Agreement. Change Status' (OIS410).

  3. Calculating Dynamic Advance

    When a dynamic advance is calculated, the percentage b/c is retrieved from 'Bonus/Comm Agreement. Enter Rates' (OIS413). The percentage depends on the forecast for the recipient's generating value.

    The forecast is calculated from the accrued generating value and the forecast factor for the last date of the advance period or the current date within the period, if advances are created before the end of the period.

    The forecast factor is based on the time past and the remaining time in the agreement period. Any seasonal curve is taken into account. The current forecast factor is calculated and displayed in 'Bonus/Comm Agreement. Change Status' (OIS410).

    This table shows an example of a percentage table:

    Generating value net weight Percentage B/C
    1000 2.00
    1500 5.00
    2000 7.00

    For a dynamic advance to be credited, the forecast must exceed the first limit for generating values in the percentage table. See program 'Bonus/Comm Agreement. Enter Rates' (OIS413).

    The dynamic advance method weighs in how the forecasted generating value develops during the agreement period. If the forecast shows a negative trend, no more advances are proposed. If it shows a positive trend, a higher percentage b/c is selected when the advance is calculated, provided that the table is set up this way.

    Description of the Dynamic Advance Method
    Forecasted generating value According to the last date of the advance period or the current date within the period. See program 'Bonus/Comm Agreement. Change Status' (OIS410).
    Percentage Retrieved from the percentage b/c scale according to the forecast for the generating value above. See program 'Bonus/Comm Agreement. Enter Rates' (OIS413).
    Paying amount Retrieves total accrued paying amount up to the last date in the advance period or the current date within the period. See program 'B/C Agreement. Change Recipient Status' (OIS411).
    Subtotal 1 Paying amount * percentage
    Previous advance See program 'Bonus/Comm Agreement. Change Status' (OIS410).
    Subtotal 2 Subtotal 1 - previous advance
    Advance percentage According to b/c agreement. See program 'Bonus/Comm Agreement. Open' (OIS412).
    B/C advance Calculated b/c can be changed manually in program 'Bonus/Comm Agreement. Open' (OIS412). if the agreement status is 20.

Description

The examples below describe:

Related topics