Challenges Caused by the Manual Process
Last week’s article mentioned that too many of today’s organizations (47% to 70% of them) are still using spreadsheets, despite the availability of smoother automated systems like SAP Commissions. This week, we’ll cover the common pain points caused by spreadsheets and the manual process. Although if you’re reading this, you might be all too familiar!
The main culprit is calculation errors. Eighty-eight percent of the spreadsheets used for calculating commissions contain errors, leading to disruptive over and under payments. Of the 10% of revenue being paid out, 88% is being paid incorrectly. That’s a huge margin of error. And think of all the time and effort needed to correct those payouts.
The manual calculation of Commissions is labor intensive. When it comes to systems, 60% use multiple platforms to gather the sales data. Of that, 77% use at least 2 systems while 23% use 3 or more. If you are using Excel today, you have to gather the data, enter it into the spreadsheet, and hope the calculations are correct. The data can come from your CRM, HR, or finance system. Wouldn’t it be nice to have that data in one place. Wouldn’t it be nice to have the process automated? This is where SAP Commissions comes in.
As organizations grow, commissions become more complex, making modeling impossible. Calculations for spiffs, bonuses, draws, and accelerators all add complexity. It’s a time consuming process to adjust, test, analyze, communicate and execute. And how do you efficiently test a spreadsheet with multiple inputs, calculations, macros, and worksheets?
Transparency is another factor. With multiple data sources, it’s difficult to know which data is feeding into calculations, which could result in discrepancies and disputes. Further, this can result in Shadow Accounting, where a sales rep calculates his commission by creating his own system. Which takes his attention off of selling. Salespeople want to sell and know how much they are making, while management wants to make sure their incentives are motivating the desired behavior and outcome. What’s it going to take to hit that multiplier, take advantage of that spiff? Transparency needs to be there along with tracking.
Along with wanting to know what he’ll make, the sales rep wants to know when payment will occur. Payouts are completed in a timely fashion. No need to wait for his bonus check. And it’s accurate. When they can see how much they’re making or have the potential to make, morale goes up and they hit the phones, ready to exceed their number for the year and maximize their paycheck.
Finally, scalability can become a problem. Managing more than 50 payees can result in an administrative nightmare, especially when sales management likes to get creative with additional spiffs and bonuses like we just mentioned above. You really need an automated system to reimagine your process being run on spreadsheets. Management must be able to analyze the data, perform some modeling runs to maximize the value of the plans, and achieve the desired outcome.
You can create, optimize and deliver incentive compensation plans at scale with SAP Commissions. You can model, compare, test and roll out new plans and promotions quickly without relying on your IT staff. Shape the behavior of your sales team to increase profits by motivating them with bonuses, multipliers, and performance insights. Pay your reps accurately and on time so they can be more productive. SAP users earn ROI from reduction of admin time to elimination of commission errors to a more confident, appreciated sales force. You can share insights with sales leadership on which plans are growing the business and improving the bottom line.
At ASAR Digital, we understand what a Reimagined Commissions process can mean to your business. Please let us know how we can streamline and operationalize your incentive compensation process – today!