Basic Tiered Commission Model Using Finicast
Commissions are a critical tool to align your sales team’s compensation to your company’s sales goals. The more they sell , the more they earn, which in turn drives higher revenue to the company. However, to really super charge the win-win alignment, the best tool is a tiered commission structure (also known as a multiplier commission structure, or accelerators).
When you have a small sales team, a simple tiered commission model is more adequate. Let’s set the stage:
- Sales Team: 5 account executives
- Commission calculation and payment frequency: Quarterly
Finicast Step 1: Create the basic quota schedule by Sales Rep
- Create a table for Account Executives (“AE”)
- Create a table for commission calculation frequency
- Create a pivot table where you have AEs by row and frequency by column
- Input the quarterly quota for each AE
- Sum up total quota by rep and by period. The “by period” total is essentially your forecasted quarterly revenue. (Note: you need to create the “total” in each of the Account Executives and Frequency tables)
This should only take about 5 minutes. If you also use Finicast for Sales Planning, you can link the quarterly quota for each AE in your Sales Planning model directly to this Commissions model to automatically populate these numbers, which should save you more than 50% of the time it takes to manually put them in.
The customization here is also very simple. If you want to add a rep (or 10, or 100), in your AE table you can easily add a rep and it will automatically update your quota schedule. You can even download this list from your HRIS system, such as ADP, Paychex, or Gusto. Or if you want to use monthly as your calculation frequency instead, you can easily update the Frequency table to be by month instead of by quarter.
Say this is your tiered commission schedule:
Now let’s translate this to Finicast Step 2: Create Commission Schedule
Finicast Step 3: Build Commission Model
At this point, you have all the tables necessary to create a commission schedule by AE, by period. Now complete the follow steps to build the Commission Model:
1. Input actual attainment by AE by period.
2. Build out Commission Model.
You only need to build the formulas once for one AE for a single period and the model will automatically populate for all your AEs for all periods. No need to copy and paste anything or accidentally use a wrong formula for one AE for a period because of human error. The totals by AE and total by period require some formula adjustments, but overall the process is fast and accurate. This example only uses 5 AEs with quarterly calculation, but to do this for 10,000 AEs with monthly calculation, rolling this out will take the exact same amount of time with no sacrifice in calculation time! The scalability is vast.
3. After the model is built, you can easily filter this table in many different ways:
Quota vs Actual by AE
Commission Calculation Details for each AE
Note: you can use Finicast to send this slice of your commission model to each AE individually - ask us how!
Target Commissions vs Actual Commission
In conclusion, using Finicast for commissions is simple and scalable. Contact us today to learn more about how to use Finicast for your commission modeling!