Sales commission automation is the seamless integration of software with your sales tech stack to pull data needed for automated commission tracking. It often draws data from your CRM and sales performance analytics and sends it to your payment systems.
Commission automation uses technology and software solutions to streamline and automate an organization’s calculation, management, and disbursement of sales commissions.
It provides teams responsible for commission calculations with a system of truth and a more accurate way to run sales compensation.
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Take Prefect’s finance team, for example.
Thomas Egbert, SVP of Finance for the dataflow automation framework platform, sought to ditch time-consuming spreadsheets. He also wanted to give his sales team transparency into their earnings through a user-friendly experience.
Since automating commission tracking with QuotaPath, “We cut our time spent on commissions calculations by 50%+,” said Thomas. “This platform has significantly upgraded our sales compensation process. QuotaPath saves days of time worth of unnecessary spreadsheets and emails.”
Despite how many organizations quickly find value like Thomas by automating processes that typically slow teams down, 60% of organizations still rely on spreadsheets for manual calculations.
Will you automate a commission tracker app this year?
In this blog, we define sales commission automation, its benefits, choosing the right software, setting up your system, overcoming challenges, real-world examples of success, future trends, and streamlining sales commissions with automation.
Why is sales commission automation important?
Sales commission automation allows you to calculate payment for incentives on multi-year deals, renewals, demos, specific products, and users.
Sales commission automation tags sales reps involved in each sale, tracks commission earnings, provides transparent sales commission reporting to sales reps, and enables them to forecast their future earnings.
This method saves time and eliminates the errors and issues from calculating commissions in spreadsheets.
Benefits of automating sales commissions
The key benefits of commission calculation automation are that it streamlines the incentive management process and enables easy commission structure optimization. It simplifies steps like earnings calculations, deal approvals, payments, and amortization of sales commissions.
Automating sales commissions offers many benefits, including:
Saves time: It eliminates manual processes and excessive back-and-forth communication in commission tracking, calculation, and error resolution.
Increased accuracy: Payment calculations occur through CRM to payment system integration, reducing errors and building trust across the sales team.
Transparency: Helps quota-carrying team members understand how they earn commissions as well as when and how much in their paycheck.
Sales rep motivation: A greater understanding of the compensation plan gives it the power to motivate sales behaviors that drive business goals.
Single source of truth: Instead of a password-protected spreadsheet or platform, automating sales commissions gets everyone on the same page in discussing sales incentive accuracies or discrepancies.
Greater visibility: Provides visibility into the performance of your sales compensation plans.
Choosing the right sales commission automation software
The global Sales Commission Software Market is expected to triple its 2020 value by 2028.
Despite the many options available in the marketplace, choosing a sales compensation software partner isn’t difficult as long as you know what to pay attention to during the selection process.
We’ve covered you with what to remember to help you select the right sales commission automation software.
Select sales compensation software that allows you to add new team members and build or adjust incentive plans quickly and efficiently as your business scales.
The platform you select should provide executive- and rep-level sales commission reporting on pipeline forecast and quota attainment. Choose a tool that automatically generates accurate forecasts based on CRM data so leadership can visualize their sales team’s projections.
Plan drafts and testing
When it’s time to make adjustments to your existing plans or create a new one, your platform should enable you to draft a plan proposal and test it against previous sales data.
Plan performance monitoring
Your comp plan may change throughout the year depending on its performance and the market. How will you tell if it’s performing the way you intended? Choose a platform that tracks how your team is progressing to plan and displays total earnings, average effective rate, and plan attainment by rep.
Your selected compensation automation tool should allow your accounting team to recognize commission expenses to ensure compliance with the new ASC 606 regulations.
Consider how long it will take to train your team and use the system to run commissions. Look for a fast onboarding process without sacrificing quality.
Trusted data and math
Confirm that the software you select offers native integrations with no manual refreshes or nightly updates, so data is automatically pulled from your CRM. This ensures that the information used to calculate commissions will be accurate and up to date.
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Select a vendor that is easy to get in touch with after you sign up.
Look for a rapid response time and ongoing assistance with adding and designing new plans, running payouts, or adjusting comp plans.
No minimum user limit
Ensure that the sales commission automation solution you select can accommodate your team, whether you’re a startup with your first two reps or a multi-continental organization.
Identify a solution that Finance, RevOps, and your Reps will enjoy using. Your chosen platform should include a user-friendly interface that’s easy to navigate. It needs to help reps understand their comp plans and enable them to view goals, accelerators, and bonuses and track progress toward milestone attainment.
Team collaboration within your chosen platform can streamline the commission discrepancy dispute process. For example, look for features that enable reps to escalate disputes through the platform, where Finance and Accounting can quickly respond.
Look for an intuitive solution that requires minimal training. This way, new users will have a general understanding of how to use it without training.
It should be easy to determine how much your sales commission automation software will cost directly on the vendor’s website.
Setting up your sales commission automation system
Once you’ve selected your commission software, you’ll have to line up a few things to set it up correctly.
|Clear Commission Structure
|Define your commission plan, including rates, rules, and criteria.
|Accurate Sales Data
|Ensure your sales data is complete and error-free.
|Assess your existing software for integration with commission management tools.
|Access to Historical Data
|Gather past commission data to establish benchmarks.
|Document your commission policy for reference.
|Support and Training
|Prepare training materials and support for your sales teams.
|Identify key personnel responsible for system setup and management.
|Allocate funds for commission management software and any required integrations or customizations.
|Data Security Measures
|Implement data security protocols to protect sensitive information.
|Develop a testing strategy to ensure the system works as intended.
|Plan how you’ll communicate the changes to your sales team.
|Ensure your commission system adheres to legal regulations.
|Dispute Resolution Process
|Define a process for handling commission disputes.
|Choose the relevant key performance indicators (KPIs) for tracking and analysis.
|Consider reporting and analytics tools for monitoring commission performance.
|Documentation and Records
|Maintain records of all commission-related activities for transparency and audit purposes.
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Overcoming common challenges
Although automated commission tracking ultimately streamlines and simplifies the sales commission process, some common challenges should be considered. Below are the top five challenges and how to solve them so you are prepared when you encounter them.
Challenge #1: Complex commission structures
Many organizations have intricate commission structures with various tiers, bonuses, and exceptions. Automating these complex structures can be challenging.
Challenge #2: Data integration
Integrating data from multiple sources, such as CRM and ERP, to calculate commissions accurately can be complicated, especially if data quality is poor.
Solution: When shopping for a sales commission automation system, remember how easy it will be to integrate the platform with your deal source of truth.
Challenge #3. Dispute resolution
When commission disputes arise, automated systems need transparent processes for resolution to maintain trust among sales reps.
Solution: Ensure your platform has in-app abilities and task notifications to flag and resolve commission issues for reps and admins.
Challenge #4. Training:
Scheduling and implementing team-wide training to use the new system effectively can be time-consuming.
Solution: Find a tech partner with a user-friendly interface and multiple options to administer training.
Challenge #5. Scalability
As your business grows, the commission system must scale and adapt to handle increased data volume and complexity.
Solution: During the buying process, ask your vendors for references that have grown and scaled with their platform to share their experience. Pay attention to how easy it is to add new teammates, swap subscriptions, and adjust comp plans.
Real-world examples of sales commission automation success
Don’t take our word for it. Sales commission automation works. Here are a few examples of businesses that have benefited from automated commission tracking.
runZero, a rapidly scaling company, started struggling with commission spreadsheets. They integrated QuotaPath with HubSpot to automate commission calculations, increase earnings transparency, and remove errors. They commenced onboarding within four days of signing with QuotaPath and were fully ramped and automating commissions in less than two months.
Sales compensation errors are now a thing of the past.
EverView had 35 compensation plans, some of which consisted of as many as 12 components, for a sales team of 80. They were tracking commissions manually at that time. Sellers spent 2 hours each week calculating commissions. Fifty percent said they didn’t understand their comp plan and didn’t know how much they would get paid until their paychecks dropped.
Once QuotePath was implemented, EverView consolidated their 35 plans into eight and then to 1 in QuotaPath, allowing sellers to measure attainment and earnings anytime.
The comp plan makeover, seller visibility into future earnings, and a new targeted sales structure led EverView to its highest sales year, where 70% of the team met quota, and 20% met 90%.
Blackthorn leaned on Salesforce formulas to calculate commissions.
As the sales organization expanded to include sales development, customer success, and partnership teams, the complexities in the commission structures outgrew salesforce formula capabilities.
After partnering with QuotaPath for sales commission automation, Blackthorn was fully onboarded in less than two weeks. They saved 5 to 10 hours of work every time a new quota was introduced and tracked three months of record-breaking sales following implementation.
Future trends in sales commission automation
Our 2024 Sales Compensation Plan Report revealed four key takeaways surrounding sales compensation plan design, management, and execution, and its impact on performance and commission disputes.
- 100% of Revenue leaders agree that sales comp plans need improvement.
- There’s a disconnect between how RevOps, Finance, and Sales view the efficacy of comp plans.
- Most sales reps find their comp plans challenging to understand.
- 91% of organizations have less than 80% of their sales reps hitting quota.
Compensation plans must align with the company’s goals to motivate sales rep behaviors and be more straightforward for reps to understand.
Therefore, in 2024, leaders must overhaul their sales compensation plans and processes to align with business goals, increase sales rep motivation, and simplify plans.
Conclusion: Streamlining your sales commissions with automation
Sales commission automation simplifies incentive management by replacing spreadsheets with software to pull data from your CRM to your payment systems. This saves time, reduces errors, builds transparency and visibility, and motivates reps to drive the attainment of business goals.
Selecting the right solution and implementing sales compensation software isn’t difficult, especially with a supportive vendor partner.