Tracking commissions due and paid a sales force is an area of functionality I believe webERP could benefit from some improvements. I've approached trying to track and calculate sales commissions before. Being a salesman first and computer systems guy second, commissions are near and dear to DctrJoe's heart.

A few years back I took an interest in Paradox from Borland and built an in-house Purchase Order Management system for a multi-line sales agency. I decided the only way I could possibly deal with commissions was to put 'commission rate' and 'commissions earned' fields in the sales order lineitems detail table.

Companies using webERP that offer a single product line with a small sales force may easily be able to get by with a commission tracking system that calculates the total of all orders written by a given salesman and pay a percentage based on that total . . . but for others this will not provide enough detail.

The current venture that I am installing and maintaining webERP for is another multi-line sales agency with three pricing levels for three different sets of customers: OEM, Distributors and Retailers. OEM's get the sharpest price, distributors get enough of a price break that they can make their mark selling to retailers, and of course we wouldn't turn down selling to a retail customer. We are working with about 30 manufacturers across a dozen product categories, some of which are fairly profitable and others are strictly a commodity business of high volume and low margin. We won't be paying the same commission rates on the same products sold to different customer types.

Also, the same commission rates don't apply to a given product sold to a retail-type customer if the customer buys 144 pieces versus buying a 'deal' price on 1728 pieces when the salesman discounts the price on that product to secure the 1728 piece sale. A real world example would be from an photo album company we work with . . . on the whole they pay, 10 percent commission. But on Photo-Video storage boxes the commission drops to 2 percent when sold in pallets of 1,000 pieces. So on any given PO there could be two or three different commission rates on items from the same supplier for one customer.

Commissions range from 5 percent to 15 percent from different suppliers. If the supplier themselves are a multi-line distributor they may have a similar range within their own offering – some lines pay 5 percent, others 7 percent and maybe even some 10 percenters thrown in there.

Having a 'commissions earned' column in the line items detail table at least gave me the possibility in the PO Management System of calculating the correct commissions total for a given order. . . in the 'stockmaster' table I setup the default commission rate for that particular item which I pulled into the line items table and did the math to come up with the commissions earned, and stored that value in the lineitems table as well. When you give that commission check to a salesman he is going to want detail . . . he needs to be able to determine where the money comes from to best direct his time. The failure of the system I put in place was that the exceptions to the default commission rates weren't table and data-driven. The person creating the order had to know the correct rate. Since the system was designed for salesman entering their own PO's, that wasn't such a problem.

webERP offers the ability to track special pricing given to a customer down to the branch level. Most scenarios I've been involved with as a salesman, the salesman shares in any discount given. If I offer customer A special pricing on item B I earn commission rate D which is less than the default commission rate C.

Additional real-world scenarios that I believe need to be taken into account would include shared commissions between a master and a sub-rep. A supplier may choose to hire a sales agency to represent their product. That agency in turn hires another sales agency to extend the territorial coverage they offer the supplier. The master rep pays 80 percent of the commission earned to the sub-rep and keeps 20 percent for himself. (Most systems would let the master rep figure out what he owes who.) An in-house example might be a sales manager who earns an override on the sales of the 25 company guys he has in the field. Or you might want to pay bonus commission to someone who achieves their quota. Several of the suppliers we represent pay say 7 percent commission on sales. We are assigned a sales goal for the year. At the point in the year where we achieve that goal, our commission rate changes from 7 percent overall to 10 percent overall for the balance of the year.

Other things that would need to be taken into account in a full-fledged commissions tracking system would include whether you pay commissions earned at the time the sales order is placed, or at the time the sales order is paid for. Both have their benefits. Salesmen like the commissions to come right away. Risk-averse accountants want to pay in the month the sales order has been remitted in full.

Typically defective returns aren't held against the salesman. If 10 units go out, 2 come back defective and are two units are replaced that's no problem. Returns other than defective do have to be tracked back to the salesman. If 10 units go out and 8 come back for whatever reason and credits are issued to the purchaser then charge backs need to be made to the salesman's commissions.

If commissions are paid when the sales order is placed, and a particular customer has a hard time paying his bill and ends up in collection, charge backs are typically made against the salesman's commission.

Perhaps others have some experiences of their own in how they or their companies track commissions. I'd be interested to learn how others have handled this. Eventually I'll be asked to put something in place for the folks I am currently working with. Agreed that we aren't the typical webERP user, but a full-fledged commissions tracking system would add strong appeal to the product. It is not something handled well by anyone that I know of. 'Course I'm not familiar with the big-dog stuff folks pay thousands for.

Phil: Great real world experience based spec!! A system that handles all of the above would be really amazing...

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