Commissions Overview

Hierarchical Structure

To process commissions using a hierarchical structure, you should understand the structure involved. For example, this diagram shows a typical salesperson/commission structure:

It shows that the National Sales Manager receives 2% of all invoices generated, the Eastern Sales Manager receives 4% of all invoices generated by the salespersons that he manages, and the Western Sales Manager receives 4.2% of invoices generated by the salespersons that he manages. Each of the salespersons receives the indicated percentage of commission.

Processing and Calculating Commissions

After you have set up all forms used for calculating commissions, the system is ready to process commissions. After customer invoices are posted, these rules are used to calculate the commission amounts due:

• When the invoice is posted:
  • If the Commission Due on Payment check box is selected on the Service Parameters form, commission due records are generated only when orders are invoiced, and based on what the customer actually pays.
  • If the Commission Due on Payment check box is cleared, the total commission amount due is recorded at this time.
• When payment is received from the customer, the commission due for each salesperson for each invoice is calculated as follows:
  • The percentage paid of the total invoice is calculated using the following formula, allowing commissions to be calculated on partial payment of invoices:

    PP = AP/IT

    where:

    • PP = Percentage Paid
    • AP = Amount of Payment
    • IT = Invoice Total
  • The percentage of commission due to each salesperson is determined using the following formula:

    PCD = PPI * SCP

    where:

    • PCD = Percentage of Commission Due
    • PPI = Percentage Paid of Invoice
    • SCP = Salesperson's Commission percent
  • The commission amount due to each salesperson is determined using the following formula:

    CAD = PCD * IT

    where:

    • CAD = Commission Amount Due
    • PCD = Percentage of Commission
    • IT = Invoice Total
• Because the system allows various levels of salespersons, a special process is followed to create the commission due listed above for each salesperson. In order to process the commission due, the commissions function performs the following steps:
  • The system refers to the Salespersons form for the salesperson listed on the invoice and calculates the percentage and commission due to that salesperson.
  • Next, the system refers to the Sales Manager field in the Salespersons form, and calculates the percentage due for the sales manager (if the Sales Manager field contains a salesperson's ID.)
  • If a number exists in the Sales Manager field of the Salespersons form, then the commission is calculated for that manager.

This process continues higher up the chain of command until a blank Sales Manager field is encountered. This allows commission payments to be given to a salesperson, as well as to all managers higher up in the hierarchy for any invoice.

Commissions Due

Commission due records are not deleted when commissions are paid, but rather are marked as paid. Therefore, by using the Commissions Due form, you can adjust commissions that are due.

Altering Calculation Methods

Currently, commission percentages are calculated both by salesperson and by product code, as defined in the Commission Table Maintenance form. The commission calculations, however, may be customized to fit your specific needs.