Your go-to-market teams often earn incentive pay in addition to their base salary.

If they don’t, they should (in our humble opinion). 

And if your RevOps teams support your GTM team (which they do), shouldn’t they also earn variable pay?

“I do think RevOps should have their own compensation structures,” said RevOps Leader Sarah Ditmars. “The better the team does, the more revenue made. This revenue directly reflects your team’s performance, which is tied to RevOps’ efforts and responsibilities.”

But if your RevOps practice supports all core revenue operations functions—marketing, customer success, and sales—then their comp plan should reflect that accordingly. 

“When you only incentivize revenue, you end up glorifying sales and alienating the other two,” said Sarah. 

So, how can you think about RevOps compensation plans? With help from Sarah, we outlined a few structure options below. 

Recommended Reading

RevOps vs. Sales Ops: An interview with RevOps Leader Christian Freese

Take Me to Blog

RevOps Compensation Plans Examples

According to Pavilion’s most recent compensation benchmark report, the most common variable pay split with RevOps is 85% base and 15% variable.

“As is the case with all comp plans, you pay them for what you want them to do and the results you want,” said Graham Collins, QuotaPath Head of Partnerships. 

One RevOps comp plan example that encompasses all of RevOps focuses is a profit-sharing model.

Profit Share RevOps Comp Plans

Sarah, for instance, earned a quarterly percentage of profits at a previous company.

“I really liked it,” Sarah said. “Your leaders feel like you have ownership of your cash flow forecast, and it was more transparent than giving someone options when it’s not a publicly traded company.”

This might look like:

• Cash Bonuses Based on Profits: A portion of the company’s profits are set aside for a bonus pool, which is then distributed to leaders based on pre-defined criteria (e.g., individual performance or achievement of company goals). This directly ties leader compensation to profitability. (Think: EBITDA, or earnings before interest tax depreciation amortization.)
• Performance-Based Profit Sharing: This is similar to cash bonuses based on profits, but the payout is based on a combination of company profitability and individual or team performance metrics.

The percentage of their cut will vary depending on the company’s stage, size, and industry.  

For example, earlier-stage startups might allocate a smaller percentage of profits for sharing, potentially in the 5-10% range.  Conversely, mature and profitable SaaS companies might allocate a larger portion, potentially in the 15-20% range or even higher, depending on their financial strength.

RevOps Comp Plan With Options

You could also look into RevOps incentive pay structures based on options, although this has decreased in popularity in recent years.

Carta’s 2023 State of Startup Compensation report revealed that the average equity benchmark for new hires was down nearly 37% in 2023 from November 2022. (We are starting to see a slight rebound in 2024.)

In an option/equity structure most common with startups, the company offers employees a percentage of ownership in exchange for their contributions. This builds on the idea of individual contributor ownership, but it’s often a gamble that rarely pays out.

90% of startups fail, with 70% folding between the second and five-year mark. 

Plus, as Sarah pointed out, option models aren’t easy to actualize into earnings.

“Not everyone understands what options mean,” said Sarah. “It’s hard to see what compensation is outside of a base salary.”

Commission with Accelerators Template

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RevOps Compensation Plans Featuring Accelerators

Another option is accelerators.

We love an accelerator for our individual sellers and sales leadership. Could it work for RevOps, too?

“Since RevOps doesn’t have full control over sales outcomes, I don’t think they should have the same structure as sales, but there should be some type of plan, like a quarterly accelerator,” said Sarah. “That’d be a great payout.” 

If the goal is revenue growth, tie the accelerator to the goal’s timeline. If your company has a smaller RevOps function that supports CS, marketing, and sales, consider separate accelerators for each one. That encourages them to evenly distribute their time and efforts evenly instead of focusing entirely on sales.

Or, if you want to stick with one accelerator, “find your business’s North Star metric and align it with that,” Graham said. 

MBO-Based RevOps Comp Plans

David Maxey, a RevOps leader and consultant, recommended pairing a percentage of incentive pay tied to the business’s most important metric with management by objectives (MBO). 

“What I recommend is tying at least a quarter of the variable compensation to overall company revenue, especially if the RevOps person played an integral part in the annual operating plan.  The other 3/4, however, could be tied to revenue if the machine is up and running and needs guidance and maintenance, but if there are major projects to be completed, such as the implementation of a pipeline system, then a large portion of the variable should be tied to completion of that MBO,” David said in a LinkedIn article.   

He even offered this free spreadsheet that outlines a RevOps comp plan with an MBO component.

Best Practice: Offer Choices & Manage Up

Before we part ways, Sarah offered some best practices to consider before solidifying RevOps compensation packages.

“When it comes to a RevOps leader, you’re not talking to someone new to the industry,”
Sarah said. 

As such, taking a bottom-up approach to RevOps leaders comp plans is recommended.

“Give them options,” Sarah suggested, which is what her previous company offered to managers. 

“We gave them an option with a higher base and lower variable pay, and the reverse option,” Sarah said. “They all chose lower base because the incentive on the top end was much higher.”

This allows them to feel like they own it and have a say in their pay. 

“It’s managing up,” Sarah said. 

GTM Role-Based Comp Plans Examples and Resources

For additional comp plan examples, check out our following free resources:

• VP of Sales Compensation Package
• Customer Success Compensation Plans
• SDR Comp Plans
• Account Executive Comp Plans
• Sales Manager Compensation Plans
• Solutions/Sales Engineer Compensation Plans

About QuotaPath

QuotaPath partners with leaders to design fair, transparent, and strategically aligned compensation plans with a company’s North Star Metric. By providing data-driven insights, modeling capabilities, and automated commission processes, QuotaPath empowers companies to create an environment where sales behaviors are directly motivated to achieve the most significant business goals. 
Learn more about our sales compensation management platform and expertise by scheduling time with our team.

A solid sales compensation strategy will drive revenue and your most important business metrics. It motivates your reps’ selling behaviors, receives positive feedback from your go-to-market teams, and builds loyalty between leadership and your front line. 

Sounds nice, right?

Wouldn’t you know that 97% of leaders admitted to experiencing challenges with their sales compensation plans in our most recent compensation trends report? 

That’s because designing compensation structures that align teams (looking at you, Finance, Sales, and RevOps), drive North Star metrics, motivate reps, and are fair and logical is much easier said than done. 

Let us help.

Our team, namely our VP of RevOps Ryan Milligan and Head of Partnerships Graham Collins, conduct compensation consultation calls to review your compensation structure and offer feedback and suggestions.

Both kickoff calls include the same seven questions to gauge the health of your plans. Fortunately, we’ve automated this to give you instant feedback on your plans. 

Evaluate the Health of Your AE Comp Plans

Answer 7 questions to assess if your new business compensation plan strategy is healthy and balanced.

Check My Comp Plan

However, if you’d like to skip that step and read five ways to immediately enhance your compensation strategy for sales growth, see below.   

Align Your Compensation Plan to Business Objectives

First, you need to focus on alignment.

39% of RevOps leaders said their comp plans fail to align with their key performance indicators, according to our report. This step is crucial to the success of your compensation plan. Aligning your compensation plan with company goals and sales activities ensures reps are rewarded for the behaviors that drive success.

One way to do this is to wait to develop your incentive plans until your team has solidified your KPIs for the year. This is especially prevalent for those looking to address their startup company sales compensation strategy. Wait for board approval.

Then, build incentive components that directly correspond to those objectives. For instance, if your focus is growing retention and increasing closed/won rates, motivate your commission-earning reps to close and retain accounts that fit your ideal customer profile.

Test Your Compensation Plan 

Next, you should test different structures through pilot programs or simulations to help identify potential issues and unintended consequences before full implementation. You can do this by:

• Applying last year’s numbers to your new proposed plan. (This is considered high-level testing)
• Scenario test according to next year’s revenue assumptions. (Include SPIFs and any overlaps with bonuses and accelerators). 
• Identify the highest possible commission payout a rep can achieve on a deal, considering all applicable commission rules.
• When testing, look at the average annual commission earnings across the sales team.
• Test the impact of individual factors like quota-to-OTE ratio, commission rates, and multipliers in isolated settings.

Measure Performance

Once your plan is up and running, you must monitor its performance. You can do this by regularly tracking critical metrics to see how your compensation plan impacts sales results, rep behavior, cost, etc.

We recommend the following:

• Attainment over time to identify seasonal trends and rep selling consistency
• Revenue growth rate to evaluate the impact of sales commissions on revenue increases
• Earnings by comp plan component to learn which part of your comp plans sellers are earning the most from
• Commission expense ratio to compare compensation expenses to gross profit margin
• Commission payout ratio to track the percentage of revenue used to payout commissions
• Effective rates to see if you’re underpaying or overpaying everyone who earns a commission per deal
• Average deal size to measure the average value of sales transactions against the size of deals reps sell most of
  

Recommended Reading: How to Measure Sales Commission Effectiveness

Accept That You’ll Need to Adjust It

Now that you know which metrics to pay attention to, you can adapt your plan according to those data points, anecdotal rep feedback, and what the market conditions call for.

Should you need to make adjustments, remember that you can test future changes by implementing a SPIFF. This lets you see how a comp component influences selling behavior before solidifying it within your comp plan.

For instance, if you’re contemplating multi-year contract accelerators, test a higher commission rate for a month or quarter as a SPIF for contracts lasting 2+ years. 

Recommended Reading: Do SPIFs Work? Why and When to Use SPIFs 

Customize to Role/Territory/Product/Team

Lastly, do not, under any circumstances, copy and paste a compensation plan across companies, teams, and products.

A one-size-fits-all approach rarely works.

Consider tailoring elements of the plan to account for specific roles, territories with varying sales cycles, or unique team dynamics. Your most senior reps should not be on the same comp plan as your junior account executives. While you may apply the same commission rates and SPIFs, your senior reps should have different quotas and OTEs. Likewise, reps entering a new territory should be on plans that mirror a startup’s first compensation plan. 

Recommended Reading: How to Build a Comp Plan For a New Territory or Product

Additional Considerations

These five practices should put you in a good position to increase the performance and value of your compensation strategy.

Some additional things to consider:

• Simplicity and Transparency: A complex compensation plan can be confusing and demotivating. Strive for clarity and easy comprehension for your sales team.
• Internal Controls and Audits: Maintain a system of checks and balances to ensure accuracy and prevent errors or potential abuse.
• Communication is Key: Communicate the rationale behind your compensation plan and any changes made. Explain the “whys” and provide ongoing support to reps.
• Competitive Benchmarking: Research industry standards and competitor compensation structures to stay competitive in attracting and retaining top talent.

By incorporating these elements, you can create a sales compensation strategy that effectively motivates your team, drives desired sales behaviors, and ultimately fuels business growth.

About QuotaPath

Need additional assistance with your compensation structures? QuotaPath partners with companies to design plans to motivate selling behaviors that align with their business goals. From free compensation plan consultations to in-app plan modeling and analytics, we’re here to help. Schedule a time with our team to learn more. 

Companies with a well-designed sales bonus structure report 50% higher employee retention.

Creating a strong plan is crucial to attract and retain top talent in the competitive SaaS industry, where more open roles exist than highly experienced candidates. Bonus structures also play an essential role in motivating employees and aligning individual performance with company goals.

A bonus structure is an incentive consisting of a designated sum of money awarded when an employee meets or exceeds a target. The key components of a sales bonus structure include target metrics, payout thresholds, and performance periods.

SaaS companies use various bonuses, including performance-based, spot, and profit-sharing bonuses. We’ll define these below.

In this article, we’ll explore various bonus structure examples across different roles in SaaS companies. Remember that bonuses will vary according to the role, such as sales, marketing, customer success, sales managers, or engineering, which we’ll outline below.

Bonus Structure Examples + Definitions

There are various bonus structures you can use in your incentive strategy. Consider these definitions and compensation structure examples as you build your plan.

Performance-based Bonuses:

Three popular performance-based bonuses include a single rate, a single rate attainment point bonus, and a milestone bonus.

Single rate: A quantity-based bonus plan that awards a set dollar amount for each deal a rep closes, regardless of how large or small the deal is. An example of a single rate bonus is when a sales rep earns $200 for each deal they sell.

Single rate attainment point bonus: A single rate, revenue-based bonus plan with a fixed dollar amount awarded per quota attainment point. For instance, under this bonus plan a rep earns $50 per quota attainment point. Therefore, if they achieve 100% of quota by the end of the period, they receive $50 x 100 points, or $5K.

Milestone bonus: A milestone bonus is a fixed amount awarded when a predetermined threshold is achieved or exceeded. This type of bonus is often used to motivate a specific level of achievement, such as hitting quota every month. Therefore, when a rep hits their quota, they earn the milestone bonus. If they fall short, they earn nothing. Then if they exceed quota, they do not earn any additional award in this scenario.

Spot Bonuses

A fixed monetary reward is paid when a specific result is achieved. For example, a new hire receives a signing bonus, or a sales rep is awarded a spot bonus for closing the most sales during a set time.

Profit-sharing

A percentage of a company’s profits over a designated time, such as quarterly or annually. This award is typically offered to management as an incentive and only applies when the company sees a profit.

Bonus Structure Examples by Roles

Now, let’s do the same but by role.

Sales Bonus Structures

Below are a few of the sales metrics tied to compensation.

• Quota attainment: A measure of individual or team performance compared to sales goals.  
• Revenue generated: The total revenue resulting from closed sales during a defined period.
• New customer acquisition: Number of new customers secured during a set period.
• Account expansion/upsell: Revenue growth generated by existing accounts purchasing an additional product or more of the product or service they’re already using.

To pay these out, you could offer:

• Commission-based bonus: The percentage of new sales or exceeding quota triggers a bonus payout. For instance, a 10% commission for exceeding quota by 10%.
• Tiered Commissions: Increasing commission percentages based on exceeding specific sales targets. For example, 10% commission for 100% quota attainment and 15% for 120%.
• Achievement Bonuses: Lump sum bonus for achieving specific goals like landing a large client or opening a new market.

Marketing Bonus Structures

Next, we’ll take a look at metrics tied to marketing incentive pay.

• Lead generation: Number of new potential customers identified and cultivated.
• Qualified lead conversion rate: The percentage of qualified leads that result in a closed deal.
• Customer acquisition cost (CAC): The total sales and marketing spend to close a deal.  
• Marketing qualified leads (MQLs) generated: Leads that have shown an interest and are more likely to buy. 

Payout on marketing plans could look like:

• Performance-based: Bonus tied to exceeding goals for lead generation or conversion rates. For instance, a bonus for achieving a 20% increase in MQLs.
• Campaign-specific: Bonus for successful marketing campaigns that achieve specific objectives such as brand awareness or website traffic.

Customer Success Bonus Structures

Customer Success Manager compensation plans can be a bit of a tossup. Let’s start with the most common metrics CSMs are held to.

• Customer retention rate:  The percentage of customers you keep compared to the amount you lose.
• Net Promoter Score (NPS): A measure used to assess customer loyalty, satisfaction, and excitement about a company based on a one-question survey inquiring how likely they are to recommend your product or company to a friend or colleague. 
• Customer lifetime value (CLTV): The total projected revenue a customer generates throughout their entire relationship with your company.
• Upsell/cross-sell success: Revenue generated from sales of more or additional products to existing accounts. 

Now, here are some ways you can pay out according to those metrics.

• Renewal Bonuses: Bonus based on exceeding customer retention targets. For example, a bonus for achieving a 95% renewal rate.
• Expansion Bonuses: Bonus for successfully upselling or cross-selling to existing customers such as a bonus for increasing average revenue per user (ARPU) by 10%.
• Customer Satisfaction Bonus: Bonus tied to achieving high customer satisfaction ratings like NPS scores.

Engineering Bonus Structures

It’s also a best practice to put your Sales Engineer or Solutions Engineer on a bonus structure. Some metrics within their control include:

• Project completion on time and within budget
• Bug fixes resolved
• Code quality
• Innovation and efficiency improvements 

As for structuring their payouts, consider:

• Project Milestones: Bonus for achieving key project milestones on time and within budget.
• Innovation Bonuses: Bonus for developing new features or improvements that significantly benefit the product or process.
• Team-based Bonuses: Bonuses awarded to the entire engineering team for achieving collective goals or overcoming major challenges.

Company Bonuses

Why not put your entire company on a bonus structure? This helps to align the entire organization toward a key metric of your business. Here are some examples:

Profit-sharing: Bonus pool based on exceeding company-wide profit goals, distributed proportionally among all employees.

Company Performance Bonus: Bonus based on achieving specific company-wide objectives, like reaching a certain market share or successful IPO. For example, at QuotaPath, we have a corporate bonus tied to our North Star metric which is a customer milestone within the product.

Setting Bonus Structure Best Practices

These best practices for setting bonus structure will help you prevent major missteps while boosting plan success.

Have a budget: Confirm that there’s room in the overall compensation budget or make the appropriate adjustments before implementing bonuses.

Test extreme payout scenarios: Leverage historical compensation data to test your new bonus structure. Then use pressure testing to prevent overpaying in comparison to annual recurring revenue.

Ensure the bonuses are attainable and competitive: Bonuses must be realistic, achievable, and competitive to be effective. Otherwise, they can backfire by demotivating employees. A couple of ways to gauge how realistic bonuses are is by using our Quota:OTE Calculator and reviewing industry averages to ensure your bonus structure is well aligned.

Ask for team feedback: Meet with qualifying team members to get their input and confirm these bonuses motivate them, otherwise they won’t drive the desired behaviors.

Communicate the structure clearly: Explain plan details in various formats including jargon-free documentation to increase team member understanding and adoption.

Conclusion

Well-designed bonus structures are essential in the highly competitive SaaS industry. They enable companies to attract, retain, and motivate employees while driving business goal achievement.

There are various bonus types and structure examples to suit your business objectives.

QuotaPath partners with organizations to set bonuses that align and drive performance to achieve your key business objectives while measuring outcomes and efficiently running payouts. Schedule time with a team member for help setting your bonus structures today.

Companies with thoughtful incentive compensation plans see an average of 22% increase in sales performance. Traditional compensation structures can leave employees feeling unmotivated and disengaged, yet aligning employee performance with company goals can be complex.

Incentive compensation management offers a strategic approach to sales team motivation and retention through performance-based rewards.  Implementing a well-designed incentive program can boost employee engagement, improve performance metrics, and ultimately drive business growth.

Understanding Incentive Compensation Management

Incentive compensation management creates, establishes, and administers an incentive compensation plan. Incentive compensation typically consists of performance or results-based variable pay.

Variable pay commonly consists of a base salary plus some form of incentive reward. Various types of variable pay include commissions, bonuses, stock options, and performance-based pay tied to performance or results metrics.

Incentive compensation management is intended to motivate employees to drive specific behaviors, reward the desired performance, and achieve business objectives.

The Importance of Incentive Compensation In Sales

Both businesses and employees benefit from effective incentive compensation management, making it a win-win.

Key Components of Incentive Compensation Plans

The essential elements of incentive compensation plans include:

• Designing Effective Incentive Plans

Building an effective incentive compensation plan requires the selection of bonus and commission structures, setting goals, and aligning incentives with company strategy.

There are various types of incentive structures to choose from such as commissions, bonuses, profit sharing, and stock options. Consider which of these bonus and commission elements you’ll include in your incentive plans.

Set SMART goals for your incentive compensation plans that are Specific, Measurable, Achievable, Relevant, and Time-bound.

Align incentives with company strategy by rewarding behaviors that drive business goal achievement. Otherwise, you’re setting yourself up to fall short of company objectives.

• Communication and Transparency

Your methods and clarity in communicating, implementing, and managing compensation greatly influence the plan’s overall success.

Effective compensation communication plans are essential to the success of your incentive plan. They help employees understand the plan details, its intent, and what support reps can expect under the new plan.

Provide regular feedback on performance to eliminate miscommunications or misunderstandings. This allows you to gauge the incentive plan’s effectiveness of driving desired behaviors and increases employee understanding.

Standardizing compensation plans for every person with the same role will ensure fairness and consistency in plan application. Then, by evening out territory, everyone can have the same shot at achieving on-target earnings (OTE) for their position.

• Technology and Tools

Software facilitates effective incentive compensation management.

Utilizing software for automating calculations and tracking performance data ensures accuracy while reducing errors and commission disputes.

Leveraging data analytics to monitor plan effectiveness provides insights and sales performance metrics to identify trends and facilitate plan improvement easily.

Streamlining administration and reporting processes, saving valuable staff time by reducing manual data input. Software integration capabilities make this possible by pulling relevant data from CRMs and accounting software.

Integrate & Automate

Harness the power of your existing tech stack with QuotaPath’s intuitive integration capabilities.

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The Role of Software in Incentive Compensation Management

Compensation management software boosts efficiency, accuracy, and plan effectiveness in the following ways:

• Automating Calculations: Eliminate manual calculations for things like commissions, bonuses, and other payouts. This reduces errors and ensures accuracy in incentive compensation which builds trust with employees.
• Tracking Performance Data: Consolidate and track sales performance metrics relevant to the incentive plan. Providing individual and team real-time performance tracking provides additional plan transparency while increasing the team’s understanding of the plan. The ability to track their own progress also boosts individual and team motivation as they strive to hit targets and milestones in the plan.
• Streamlining Administration: Automate workflows for approvals, payouts, and reporting to reduce the administrative burden for HR and finance teams–a huge time-saver.
• Testing and Modeling: With QuotaPath specifically, revenue leaders can draft their next comp plan, test them against last year’s data, and even model potential attainment scenarios to estimate the total cost of the compensation model. This helps you avoid unpleasant surprises and potential compensation plan pitfalls while ensuring the plan won’t break the budget.
• Data Analytics and Reporting: Analyze incentive program effectiveness and identify areas for improvement. Generate reports for tracking trends and monitoring program performance to facilitate data-driven compensation decisions. Democratize the data and provide one source of truth vs. gated spreadsheets to increase transparency and trust while streamlining processes.
• Improved Communication and Transparency: Facilitate clear communication of plan details and performance data to employees, increasing their plan understanding and adoption. Enhancing transparency and trust in the incentive program also boosts the plan’s effectiveness in increasing team performance and goal achievement.

5 Incentive Compensation Best Practices For Sales Teams

Ready to start creating your incentive plan? Here are some best practices for successfully designing an effective compensation plan for sales teams:

1. Align Incentives with Business Goals:  Don’t incentivize activities that don’t ultimately drive business growth. Ensure your incentive plan rewards behaviors directly contributing to achieving your company’s strategic objectives.  For example, if increasing customer lifetime value is a key goal, the plan might reward sales reps for securing longer-term contracts or upselling additional products to existing customers.
2. Transparency and Clear Communication:  A well-defined and clearly communicated plan is essential.  Sales reps need to understand eligibility criteria, performance metrics, commission rates, and payout structures.  Regular communication and updates on performance progress keep reps motivated and engaged.
3. Balance Individual and Team Performance:  A healthy balance is key.  While rewarding individual achievement can motivate top performers, neglecting team incentives can hinder collaboration and teamwork. Consider incorporating elements that reward both individual sales quotas and team-based goals like exceeding overall sales targets or achieving high customer satisfaction ratings.
4. Data-Driven Plan Design and Monitoring:  Don’t rely on guesswork.  Utilize sales data and performance metrics to design your incentive plan and track its effectiveness.  Analyze the impact of the plan on sales performance and adjust components like commission rates or target setting as needed to ensure alignment with your business goals.
5. Recognition and Rewards Beyond Money:  Financial rewards are a powerful sales motivator, but recognition programs can go a long way in boosting morale and fostering a culture of achievement.  Public recognition within the team or company, awarding titles or badges for exceeding targets, or offering non-monetary rewards like extra vacation days can add value and create a well-rounded incentive program.

Measuring The Success of Your Incentive Compensation Plan

Gauging the effectiveness of your chosen incentive compensation strategies is essential for various reasons. It offers insights into how well aligned the comp plan is with business goals, aids with budgeting and financial planning, and sales performance optimization. Measuring incentive plan success also helps improve operational efficiency, informs data-driven plan decisions, supports regulatory compliance and fairness, and helps assess motivation and retention effectiveness.

Organizations can optimize incentive compensation plans by analyzing key metrics relevant to commission effectiveness. We recommend tracking the following data points to assess incentive plan success:

Assess business goal alignment with metrics like attainment over time, revenue growth rate, and earnings by comp plan component. 

• Attainment over time: Measures how effectively sales commissions align with overall business objectives by tracking sales target attainment over time to reveal seasonality and rep consistency across periods. 
• Revenue growth rate: Gauges the impact of sales commissions on driving revenue growth and achieving business goals. Calculate the revenue growth rate using the following formula:
  
  To calculate the revenue growth rate
  = (Current revenue – previous revenue) x 100
  Previous revenue
  
• Earnings by comp plan component: To assess how well your comp plan is driving your North Star metrics or key business objectives, look at which parts of your comp plan you’re paying the most commissions on.

Useful metrics for budgeting and financial planning include commission expense ratio, commission payout ratio, and effective rates.

• Commission expense ratio: Helps ensure commissions are within budget by comparing commission expenses with gross margin or total revenue.
• Commission payout ratio: Enables accurate financial forecasting and planning by monitoring the percentage of revenue allotted to commissions.
• Effective rates: Combined commission percentage per deal across every commission-earning role. NOTE: This needs to be below 25% 

Sales performance optimization metrics to review when gauging the success of the incentive plan include sales conversion rate and average deal size. 

• Sales conversion rate: Measures the effectiveness of sales activities in converting leads into customers, revealing the influence of commission structures on sales performance.
• Average deal size: Quantifies the average value of sales transactions, showing how commission incentives affect sales representatives’ prioritization of high-value deals.

Gauge operational efficiency with metrics like sales cycle duration and time to quota attainment.

• Sales cycle duration: Measure the effectiveness of sales processes and the impact of commission structures on sales cycle length.
• Time to quota attainment: Reveals how rapidly sales representatives achieve their targets, gauging the efficiency and effectiveness of commission plans.

Metrics that aid data-driven decisions include commission payout variance and sales performance analytics.

• Commission payout variance: Identifies deviations from anticipated commission payouts, facilitating data-driven commission plan adjustments based on performance trends.
• Sales performance analytics: Leverages individual and team sales performance data to guide commission adjustments and optimize incentive structures.

Assess regulatory compliance and fairness by reviewing measurements including commission payout accuracy, commission dispute resolution time, and discrepancy/resolution count.

• Commission payout accuracy: Gauges commission calculation accuracy to confirm regulatory compliance and fairness in compensation.
• Commission dispute resolution time: Measures the amount of time taken to resolve commission disputes, confirming fairness and compliance with regulatory standards.
• Discrepancy/resolution count: Tracks the number of commission errors or questions per pay period to discern how well your reps understand how they earn commission and how accurate (or inaccurate) your incentive calculations and data are.
  

Gauge the effectiveness of the incentive plan for motivation and retention with metrics such as sales team turnover rate, employee satisfaction with commission plans, and SPIF success.

• Sales team turnover rate: Reveals the rate at which sales representatives leave the organization, expressing the effectiveness of commission structures in motivating and retaining talent.
• Employee satisfaction with commission plans: Measures the average level of sales rep satisfaction with their commission structures, which is an indicator of motivation and retention levels.
• SPIF success: Assesses the impact of short-term incentive plans like sales performance incentive funds or special performance incentive funds (SPIFs) to determine how effectively they drive selling behaviors and whether it’s a valid full-time addition to your compensation plan.

By tracking these essential metrics, organizations can gauge the effectiveness of their sales compensation plans in driving business objectives, optimizing sales performance, supporting financial stability, maintaining operational efficiency, guiding data-driven decisions, complying with regulations like ASC 606, and nurturing motivation and retention among sales teams.

Future Trends In Incentive Compensation Management

Despite a select few leaders who question the validity of variable pay structures, more companies are adopting them not only for sales, but also across other departments such as Marketing, Solutions, Partnerships, and RevOps.

For instance, in 2018, 77% of companies in the U.S. were using variable pay programs as part of their total rewards packages, with an additional 9% reporting they were planning to adopt a variable pay plan within the next two years. Then, by 2021, that number increased by 6%, according to Harvard Business Review, which included 250 of the largest S&P 500 firms implementing variable compensation.

Schedule time with our team to see how QuotaPath can simplify your incentive compensation management.

Effective comp plans act as a powerful engine, driving peak performance from your team, attracting and retaining top talent, and ultimately fueling business growth.

Yet 97% of RevOps, Sales, and Finance leaders struggle with their comp plan processes, according to our compensation report.

A poorly structured plan can backfire with unintended consequences. 

Imagine an engine struggling with misfiring cylinders and a leaky fuel line. That’s what a lousy comp plan can be like: high costs due to inefficient structures, low motivation from reps feeling unfairly compensated, and administrative burdens for your finance team bogged down in manual calculations.

The good news is that you can avoid these pitfalls and optimize your compensation plan for both performance and cost-effectiveness.  

Here, we’ll explore five key strategies to achieve this balance:

• Aligning Your Comp Plan with Key Business Objectives
• Strategic Use of Commission Floors for CSM and Leadership Roles
• Leveraging Modeling Tools for Cost Analysis
• Automation: Streamlining Calculations and Payments
• Data-Driven Adjustments According to Reporting and Feedback Loops data

We’ll explore each strategy in detail, giving you the tools to optimize your compensation plan and unlock your team’s peak performance.

Align Your Comp Plan to Your North Star Metric

First, check to see how well your compensation plans align with your key business goals for the year. This is important and should always be the first step when designing a comp plan, regardless of role or team.

Doing so drives focused behavior for long-term success by encouraging your team to sell the right kind of deals. (Think: accounts that generate recurring revenue or likely have a high customer lifetime value). 

When rewards are tied to the company’s overall success, employees feel their efforts contribute to a larger goal. This fosters a sense of purpose and motivates them to go beyond individual targets. It also creates strategic alignment across the company, leading to a unified front from marketing to product to your front-line sellers and those responsible for renewals. 

Plus, North Star Metrics, when created correctly, are measurable metrics. By tying your comp plan to this data, you can measure its effectiveness and identify where adjustments need to be made to your compensation structure. 

Remember: Aligning comp plans with the NSM isn’t a one-time event. It’s an ongoing process that requires clear communication, data analysis, and a willingness to adapt based on results. However, the long-term benefits of a focused and motivated workforce driving towards the company’s north star are well worth the effort.

Strategic Use of Commission Floors

Next, consider implementing commission floors for leadership and customer success roles.

A floor, or “cliff,” is a minimum sales or revenue generation threshold before qualifying to earn a commission.

Here’s a breakdown of how it works:

• Threshold: The company sets a specific target amount (revenue or units sold) that a salesperson needs to reach before becoming eligible for commission.
• No Commission Below the Floor: If the employee fails to meet the commission floor, they don’t earn any commission, regardless of the total amount they sold.
• Earning Commissions Above the Floor: Once a salesperson surpasses the commission floor, they typically start earning commission based on a pre-defined commission rate or structure. This commission rate could be a flat percentage, tiered based on performance, or a combination of both.

Why should you consider adding a floor to your CSM or leadership plans? 

1. It motivates performance.
2. Controls cost by preventing payouts for low-performing salespeople.
3. It discourages discounting since commissions are only earned once passing the floor.

However, keep in mind that floors can backfire and be demotivating. Note: We are not recommending this for individual sales reps, just customer teams and leadership. Make sure your floor is fair and attainable; otherwise, you’ll lose reps to comp plans at other companies. 

Leveraging Modeling Tools for Cost Analysis

Another great way to optimize your compensation strategy is to implement a tool to help you model scenarios and analyze costs. 

Making data-driven decisions is crucial, and modeling tools like QuotaPath can be invaluable.  These tools allow you to simulate different compensation structures and predict their financial impact, ensuring you choose the most cost-effective and performance-driving approach.

They allow you to:

• Simulate Different Scenarios: Draft new comp plans and test different structures for your sales team, CSMs, and leadership against past data and performance to see what you have paid using numbers from a previous period.
  • In QuotaPath, you can also model and run attainment scenarios to see how much in total compensation costs you would pay if your team hit 80% of the goal vs. 150%.
    
• Predict Financial Impact: See how changes to your comp plan will affect your overall commission expenses. This allows you to identify the most cost-effective approach while achieving your performance goals.
  
• Optimize for Long-Term Sustainability: By analyzing the long-term financial implications of different comp structures, you can choose a plan that supports your company’s growth trajectory without creating unsustainable cost burdens.
  

In short, modeling tools take the guesswork out of compensation plan design. They empower you to make informed decisions that drive peak performance from your team while ensuring financial responsibility for your organization.

Automation: Streamlining Calculations and Payments

Manual calculations are a recipe for costly errors and delays.

We recently discovered with a new customer that they had amassed hundreds of thousands of dollars worth of commission miscalculations over the previous year without automation. Automating the commission payment process and integrating it with your CRM or ERP immediately improves accuracy and efficiency. 

An automated commission tool also unlocks commission transparency for your team, leading to a more motivated group of sellers now that they can view their forecasted earnings. 

Imagine your sales team’s delight when they can ditch the spreadsheets and access real-time insights into their earnings and commission progress.  A commission tool fosters trust, reduces administrative burdens, and empowers your reps to focus on what they do best: selling.

Plus, you can reduce your Finance and RevOps team’s time calculating and running payouts from 5 days of work to a few hours. 

Data-Driven Adjustments and Feedback Loops

Now, let’s say you put all of the above into motion. Congrats, you’re in a great position to optimize your compensation plans’ performance and cost.

But remember, a well-designed comp plan is a living document, not a one-time project.

By monitoring performance through comprehensive reporting and establishing feedback loops with your team, you can identify areas for improvement and continuously make data-driven adjustments to optimize your plan for long-term success. Here are some suggestions for staying on top of this process:

• Schedule Regular Reviews: Set aside dedicated times (quarterly or biannually) to analyze reports generated by your compensation management tool. Track key metrics like quota attainment, commission payouts, and cost-to-revenue ratios.
• Embrace Feedback Mechanisms: Create anonymous or open forums for your sales team to provide feedback on their experience with the comp plan. This can reveal areas where the plan might be unclear, demotivating, or not driving the desired behaviors.
• Conduct Stay Interviews: Regularly connect with top performers and those struggling to understand their concerns and identify misalignments between the comp plan and daily activities.
• Stay Agile and Adapt: Don’t be afraid to adjust your compensation plan based on the data and feedback you gather. The market, your business goals, and your team’s needs may evolve over time, so your compensation plan should adapt accordingly.

By following these suggestions and fostering a culture of continuous improvement, you can ensure your compensation plan remains a powerful tool for driving peak performance, attracting top talent, and propelling your organization toward long-term success.

Start Optimizing

In conclusion, crafting a compensation plan that optimizes performance and cost is no small feat. 

But by following these five key strategies, you can empower your team and fuel your organization’s growth.

• Align your comp plan with your North Star Metric to ensure everyone’s efforts drive toward the ultimate goal.
• Implement floors to ensure a minimum performance before paying commissions to your renewal teams and leadership.
• Leverage modeling tools like QuotaPath to simulate different structures and predict financial impact, choosing the most cost-effective and performance-driving approach.
• Automate calculations and payments with QuotaPath to eliminate errors, free up your finance team, and foster transparency for your reps. 
• Finally, establish a culture of continuous improvement by monitoring data, gathering feedback, and making data-driven adjustments to optimize your comp plan for long-term success.

Ready to transform your compensation strategy and unlock the full potential of your GTM team?  Schedule time with the QuotaPath team today, or sign up for a free trial. 

Parental leave policies are generally lacking, especially for women in sales. 

According to a study published by Moms First last summer, nearly two-thirds (60%) of moms voiced negative experiences with their parental leave policies.

What’s more, 42% of expecting moms said they’d consider quitting their jobs upon giving birth, citing burnout as a leading reason. And for moms with children under 5, 39% worried they would fall behind on their career trajectory.

“It’s the only role in the business where you get punished for going on leave.”

Jessi Johanson, Tilt

That’s especially worrisome in today’s market amid an economic slowdown due to crushing inflation rates. 

Dual income scenarios are not just the norm — but a must. 

So why haven’t businesses done more to ensure both parents can work?  

“The economy has to thrive, which means we must build future generations. Women in the workforce need to be able to work and build families,” said Emily Bell, Head of Client Services at Blueprint Expansion.

“That’s the part that continues to baffle me. Logically, from a business perspective, how has this not resonated with leaders? It’s a miss. There has to be empathy, but at a minimum, there have to be appropriate parameters to ensure economic growth at the fundamental level,” said Emily. 

AKA – creating work environments that accommodate working parents, especially mothers, beginning with leave policies. 

Parental Leave In Sales

Now, keep in mind this study surveyed women across all professions. How do you think these percentages shift regarding moms in Sales roles, a profession notorious for its burnout and historically less inclusive and equitable work environments for women? 

Have we created workplace cultures and parental leave policies that encourage and invite new moms (and parents) to return to their performance-based sales roles?

In our experience, more often than not, companies do not adjust compensation plans and targets for their reps on parental leave.

So, while most offer a parental leave policy for sales roles in accordance with the State and Federal Family and Medical Leave Acts, companies fail to account for the entire on-target earnings (OTEs) reps earn versus their base pay. 

“Every other employee at the company is getting their full normal pay while on leave, and their manager and the business accept that output for that team will decrease,” wrote Parentaly co-founder and CEO Allison Whalen in her blog. “And yet, most companies still will only guarantee their sales reps just their base pay during this time, and often, the business will expect the sales team to hit numbers as though the sales rep isn’t on parental leave.”

“It’s the only role in the business where you get punished for going on leave,” said Jessi Johanson, VP of Sales at leave management company Tilt.

Jessi previously worked for a company that didn’t have an actual sales parental leave policy.

“From my perspective, I felt like I got totally screwed. My base was nothing compared to my take-home pay,” Jessi said. “The short-term disability accounted for 60% of my base pay, which for me, was a huge pay cut during a very significant time in my life.”

This base-only leave policy hurts our sales parents, specifically moms, who take full leave more frequently than the secondary caretaker.

“Men who have had children while working in sales typically take the minimum amount of leave,” said Sales Leader Olivia Millard, who we previously connected with. “They have a child, keep their pipeline, come back early, and end up not sacrificing any deals.”

Meanwhile, moms return to empty pipelines and full quotas while attempting to compensate for the lost commission wages tied to their OTEs that went unaccounted for in their parental leave policy. 

However, the more attention we give this topic, the more likely teams are to fairly compensate sales parents out on leave and adjust targets and pipelines so they don’t have to start from zero. 

To help ignite change at your organization, we talked to several revenue leaders to learn best practices and policies to consider.  

“My base was nothing compared to my take-home pay. The short-term disability accounted for 60% of my base pay, which for me, was a huge pay cut during a very significant time in my life.”

Jessi Johanson, Tilt

Jessi Johanson, VP of Sales, Tilt —  Commission Splits

After her less-than-desirable parental leave experience at a previous employer with her first child, Jessi joined Tilt in 2020 while pregnant with her second. 

Tilt is an end-to-end leave of absence management platform for companies of all sizes. It supports employees on leave, their direct supervisors, human resources, and payroll teams. 

As VP of Sales, Jessi has reviewed and advised hundreds of customers on their leave policies.  And at Tilt, she helped develop their policy for sales reps, which includes the following: 

• Account executives (AEs) work territory and pipeline until the day they leave.
• They pro-rate the quarterly quota when the rep leaves by breaking it down by month.
  • For example, if a rep leaves in the middle of the quarter, they are prorated a month and half of the quota.
• While the rep is out, the rep earns commission splits with a rep of equal performance based on the stage the deal was in when the rep left.
  • Quota retirement and earnings on commission split depend on the stage of the deal
  • If a deal is already in the closing process, Jessi takes it (rep on leave receives full commission)
• Rep’s return: With a sales cycle of about 90 days, Tilt’s reps on leave return to 90 days without a quota.
  • This allows the rep to build a pipeline for 90 days
  • Jessi also prorates the first quarter depending on the segment (enterprise vs. SMB)

Tilt has about 100 employees, so Jessi mentioned that larger businesses’ policies might look a little different. 

“One of the things I see quite a lot from larger companies who have a bunch of money and who do this well is instead of commission splits, they’ll take average commissions from the past four quarters and give it to the AE while on leave,” Jessi said. 

Jessi’s Best Practices on Adjusting Comp Plans For Your Parental Leave Policy

• Work with Tilt. “I’m happy to have conversations with people!” Jessi said. 
• Read content and consume other ideas to structure it (look at LinkedIn, read QuotaPath’s blogs, etc.)
• Be specific and document: “It can feel overwhelming, but in this situation, getting into the weeds is good and helpful. This is not a policy that you can stroke with a broad brush. Be specific. AEs will appreciate the shit out of it,” Jessi said.
  • Have a formula for prorating quota
  • Build templates
• Keep it consistent every time someone goes on leave

“If you don’t take this seriously and have a good policy in place, it does impact the business. I left! I was a top performer. That impacted their revenue,” said Jessi. “Have a policy. Make it as employee-friendly as you can in whatever stage of the company you are. It will hurt you in the long run.”

“Sales professionals should be given the same opportunities as other professionals. More importantly, we should see more females in sales. If there is an inherent punishment for doing things like having children, they won’t want to be in this business.”

Jessi Johanson, Tilt

Emily Bell, Head of Client Services, Blueprint Expansion — Average of OTE

Like Jessi, Emily experienced leave policies as an enterprise sales rep at two SaaS companies.

“One of the two did it way better, but neither was perfect,” Emily said.

Emily found that the three most significant concerns for sellers taking leave are:

1. What variable coverage will you have while you’re out? Who will close the rep’s deals? 
2. Who manages your accounts while you’re out? If they are closed/won, who gets paid, if at all?  What does that coverage plan look like?
3. How do you re-enter and manage that pipeline? “You’re asking your peers and colleagues to cover for you for 3-4 months, and they deserve compensation for that, but it shouldn’t come out of my maternity leave policy — especially at larger companies,” Emily said.

As far as the best of the two policies Emily shared, it included:

• 100% base salary coverage through 3 months’ leave
  • Employees there longer than 12 months were eligible for four months
• OTE: The company took cumulative variable attainment across the previous two years and gave the average monthly amount.
  • “I felt this was fair and equitable,” Emily said. 
• Peer coverage: Colleagues who covered her 7-8 working enterprise opportunities were paid in full while she earned average earnings tied to previous performance
• 30-day transition period when deals are passed back: Hold specific convos around exceptions and hold-over scenarios.
  • “As long as that individual is made whole in the pipeline scenario, I don’t need a deal that is about to close, but I do need pipeline because I was out for so long,” Emily said.

She added, “I haven’t been able to return without feeling like the wheel has stopped, but I thought it was a fair trade.”

Meanwhile, her other company had told her, “We don’t want to make you so comfortable that you don’t come back.”

“I lived through two very different scenarios,” Emily said. 

Emily’s Best Practices Adjusting Comp Plans For Your Parental Leave Policy

• Build a culture of diversity. “Make sure people understand that we value them,” Emily said. 
• Avoid guinea pigging your policy: “Leadership seems okay with women ‘helping us spearhead this,’” Emily said. “After two teams being the guinea pig, I’m tired. Expecting women to perform while navigating all this and pioneering these new policies is unreasonable.”
• Have empathy. Recognize how challenging this is for people in your workforce, especially when it’s their first child. 

“It’s impossible not to have dual-income households in today’s economic scenario. This is not a romantic statement. At the end of the day, it benefits our economy to have better policies in place. You must have women in the workforce, generating revenue and paying taxes. If we’re forced to do this, whether you’re having a family or not, mismanaged leave policies will eventually impact you.”

Emily Bell, Blueprint Expansion

Additional Considerations for Parental Leave

A few other leaders also shared their thoughts on comp plans for parental leave.

Sergey Mann, Head of RevOps at Hebbia AI, conducted extensive research before modeling their plan and noted that deal cycle lengths significantly impact your leave policy since enterprise deals tend to complicate things. 

To adjust for this, his company, which followed a 4- to 6-month-long enterprise sales motion, gave the reps a guaranteed variable draw for the months ahead.

“The amount was tied to the percentage of quota attainment from the previous year,” Sergey said. Reps could exceed the draw if they won deals while out on leave that they had worked leading up to it. Managers covered late-stage deals, and the rep on leave earned full credit. 

Another rep on the same manager’s team handled early-stage deals, and the two reps split the credit. Additionally, the company offered quota relief for the months out and a slight quota ramp upon return. 

“We tried to come up with a policy that was most fair to all parties: the rep on leave, their manager, other reps covering their deals, and the company,” said Sergey. 

Another source, who wished to remain anonymous, offered a glimpse into what her previous company offered during her parental leave. 

“Based on the last six months of my OTE history, they compensated me 100% OTE while out to make sure I stayed whole,” she said. “I hit 100% the previous two quarters, so that was awesome.”

What wasn’t great was when the company gave her book of business to other reps and then did not return those accounts in her pipeline upon her return. 

“Ramping up was difficult. So much of our quota depended on expansion. While I closed a ton of new business, I simply could not be on equal footing with my colleagues given I had no quota relief upon return,” she said, adding that she went from the top rep to the bottom.

She said, “I couldn’t get back to the top for at least six to 12 months.” 

Next Steps

We hope you found this piece of content meaningful and that you feel prepared to initiate change at your organization.

Your first step should be to start having conversations about your organization’s current policy (or lack thereof). Then, research policies within your peer networks and at other companies to compare and identify where yours falls short or exceeds.

For additional support sparking the conversation at your company, check out our full interview with Oliva Millard and learn what steps she took to impact change at her employer. 

Our VP of RevOps, Ryan Milligan, also helped develop QuotaPath’s policy to support our reps and leaders who earn variable payouts on parental leave. 

He recommends: 

1. Analyze Current Compensation Structure: Before designing parental leave policies for your sales compensation plan, it’s crucial to understand how your reps are currently compensated.
   
   This includes reviewing their base salary, variable pay structure (commissions, bonuses, etc.), and Overall Target Earnings (OTE).
   
   Consider questions like: What’s the breakdown between base salary and variable pay? How much control do reps have over their commissions?

2. Plan for Leave Management: Develop a clear strategy for handling reps’ deals and leads while they’re on parental leave.
   
   This includes assigning ownership of ongoing deals and outlining a plan to keep existing leads warm and engaged.

3. Choose Your Leave Policy Approach: Determine the level of support you want to offer during parental leave.
   
   Options range from a conservative approach of paying base salary only to a more progressive approach of continuing full OTE payments. 

4. Facilitate a Smooth Re-entry: Implement strategies to maintain deal pipelines and prospect engagement while reps are on leave.
   
   The goal is to ensure reps don’t return feeling overwhelmed or behind upon re-entering the workforce.
   
   Consider offering ramp-up plans to help them regain momentum and achieve their OTE goals for the year.
   
5. Communicate Clearly and Transparently: Effectively communicate your compensation plan’s parental leave policies to your sales team.
   
   Explain the rationale behind your chosen approach and provide clear details on how leave impacts compensation. Openly sharing the “whys” and calculations fosters trust and understanding within the team.

Need additional help with your sales compensation plan design and management? Schedule time with our team to learn how QuotaPath can optimize your compensation plan’s performance and run payouts more efficiently. 

Sales commission expense recognition involves many complexities. In this guide we show you how to achieve accurate recording and documentation of these costs by streamlining accounting, ensuring ASC 606 compliance, and creating revenue alignment with commissions.

Let’s get started.

Demystifying Sales Commission Expense Recognition

Sales commission expense recognition is the ongoing recording and reporting of commission costs associated with obtaining or fulfilling a customer contract amortized over time in alignment with the corresponding revenue recognition.

Some businesses prefer to use the Matching Principle, recognizing commission expenses when revenue is earned, whereas others prefer Cash-Basis accounting, recognizing expenses when cash is paid.

The two most common sales commission expense recognition methods are ‘earned when earned’ (EWE) and ‘paid when paid’ (PWP). The EWE method recognizes commission expense proportionally as the associated sales progress through the sales cycle. The PWP method, on the other hand, recognizes the entire commission expense when the commission is paid to the rep.

The chosen recognition method can affect a company’s financial statements regarding profitability and cash flow. For instance, EWE revenue and expenses are recognized when they occur instead of when payment is received.

This may not reflect actual revenue and expense timing, making short-term cash flow management more challenging. On the other hand, PWP can improve short-term cash flow by deferring expenses.

Likewise, profitability assessment accuracy can be more difficult when using PWP because revenue and expense activity is not recorded when it is experienced.

Other factors that might influence expense recognition’s complexity include clawback provisions or sales returns.

How to Scale Finance Operations

Building a solid finance infrastructure is imperative to an org. as it scales. These experts shared what to prioritize and when as your business grows.

Take Me to Blog

Key Principles Of Commission Expense Accounting

Proper sales compensation accounting necessitates tax regulation and ASC 606 compliance. Failure to adhere to regulations or keep accurate records can result in significant fines, penalties, and missed funding opportunities.

The following is an overview of the main points involved in commission expense accounting for easy reference:

Aligning Commission Recognition With Revenue Generation

Aligning commission recognition with revenue generation leads to more accurate financial reporting, better decision-making, a more motivated sales team, and improved overall efficiency within your organization.

The following best practices will help you achieve alignment with commission recognition and revenue generation.

Best practices

1. Matching Principle Alignment: Ensure your commission recognition method follows the matching principle. This means recognizing commission expenses in the same period in which the corresponding revenue is recognized. This fosters a more accurate representation of your company’s profitability and aligns costs with the benefits they generate.
2. Select the Right Recognition Method: The most appropriate method (Earned When Earned – EWE or Paid When Paid – PWP) is based on your sales cycle length and revenue recognition practices.
3. EWE: Ideal for longer sales cycles where revenue is recognized progressively. Commissions are recognized proportionally as the deal progresses.
4. Clear and Consistent Policy:  Develop a clear and well-documented commission policy that outlines the chosen recognition method and its application.  Ensure consistent application across all sales transactions for transparency and fairness among your sales team.
5. Leverage Automation:  Utilize accounting software or custom tools to automate commission calculations and pay sales commissions based on your chosen recognition method. This reduces manual effort, minimizes errors, and ensures timely and accurate expense recognition.
6. Transparency & Communication:  Regularly communicate your commission recognition policy to your sales team.  Explain the rationale behind the chosen method and how it impacts their earnings.  Open communication fosters trust and helps reps understand the connection between their sales efforts and financial rewards.

Leveraging Sales Compensation Software For Accurate Tracking

Navigating the complexities of sales commission expense recognition can be overwhelming. Add in lengthy customer contracts, early renewals or cancellations, and intricate compensation plans, and ASC 606 compliance starts to feel unachievable.

Sales compensation automation software streamlines commission expense recognition and ASC 606 compliance.

It consolidates all relevant information in one place for a single source of truth, making it easier to generate reports and provide real-time insights. The software ensures the accuracy of commission calculations and data across the organization.

Sales compensation software also provides transparency into the sales compensation process making it audit-friendly.

Best Practices For Commission Accounting Policies

Follow these guidelines for creating effective commission accounting policies. 

1. Clarity and Transparency: Clearly define the commission structure in writing, including details like commission rates, tiers, and bonuses. Outline the chosen commission recognition method, EWE or PWP, and its rationale. Explain how commissions are calculated and paid to sales reps, including information like frequency and thresholds.
2. Alignment with Revenue Recognition: Match commission expense recognition with the corresponding revenue recognition period. Ensure the chosen method reflects your sales cycle length and business model, such as EWE for longer cycles.
3. Use of Accounting Standards: Adhere to relevant accounting standards for commission expense recognition like ASC 606. Maintain proper documentation to support your chosen accounting practices, including policy documents and calculations.
4. Automation and Efficiency: Utilize sales compensation software to automate commission calculations and accruals. Reduce manual errors and streamline the commission accounting process.
5. Communication and Training: Regularly communicate the commission policy to your sales team by taking steps like training sessions and FAQs. Provide ongoing training on how to understand and interpret their commission statements. Encourage open communication with the sales team regarding any questions or concerns about the policy.

Integrate Your Tech Stack

Sync the key players from your sales tech stack with QuotaPath’s sales commission software.

Take Me to Integrations

Integrating Commission Expense Data Into Financial Systems

The power of automating with sales compensation software is through integrating it with your financial systems and data analytics and business intelligence. This eliminates errors and ensures accuracy.

QuotaPath integrates easily with sources across your tech stack, thanks to self-guided instructions and a stellar customer experience team. Our seamless integrations also refresh automatically, no manual intervention required.

Financial integration options include:

• Chargebee
• Excel
• Google BigQuery
• Google Looker
• JobAdder
• Keap
• Leaflink 
• Maxio (Chargity & SaaSOptics APIs)
• Netsuite
• Smartsheet 
• Snowflake
• Tableau
• And more (we’re always adding new ones)

Streamline Sales Commission Expense Recognition

Sales commission expense recognition is complex. However, accurately documenting commission cost amortization doesn’t need to be overwhelming when you streamline accounting, achieve ASC 606 compliance, and align commissions with revenue.

Remember to select the right recognition method, develop a clear and well-documented commission policy, and regularly communicate your commission recognition policy to your sales team. Leveraging software to automatically calculate and pay sales commissions saves time, reduces errors, and boosts compliance.

Schedule time with our team to learn how QuotaPath can streamline the sales commission expense recognition process for Finance and Accounting teams.

This is a guest blog from Kenzi, a professional business writer with 15 years of experience in crafting compelling content for entrepreneurs and corporate clients. His expertise is creating business plans, marketing materials, and corporate communications that drive results. Kenzi holds an MBA and has a keen understanding of business strategy, which he uses to craft narratives that resonate with stakeholders at all levels.

Think about your sales performance. Are you confident that your revenue operations (RevOps) and finance teams are working together to maximize your results? 

In many organizations, these departments often work in silos. 

Their finance focuses on budgets and projections, while RevOps is laser-focused on the sales funnel, deals, and customer relationships. 

This lack of coordination can lead to communication gaps, budget inconsistencies, and missed opportunities. 

When you align RevOps and finance, you can leverage their combined strengths to enhance sales performance. Of course, you must plan strategically and opt for seamless collaboration.

This article explains why this alignment is essential for accurate data analysis, resource optimization, and smoother financial planning. 

What is RevOps?

Revenue Operations (RevOps) is a strategic approach that aligns various business departments to drive revenue growth and streamline processes. 

The RevOps framework aims to improve data sharing, communication, and efficiency across the organization by unifying marketing, sales, and customer success teams. 

This approach ensures that all revenue-generating teams work together toward common goals, using accurate data and consistent strategies to boost business performance.

Comprehending Finance

In a business context, finance refers to managing the company’s money, assets, and resources. It encompasses budgeting, forecasting, expense management, and strategic investment decisions. 

Finance teams analyze revenue streams and costs to provide valuable insights, ensuring the business maintains healthy profitability. Their analysis helps shape budgets and long-term financial strategies, balancing resources and mitigating risks.

Why Alignment Matters

Aligning RevOps and finance teams is essential because it provides a unified approach to revenue management. When these departments work together, they share accurate data, coordinate on budgeting and resource allocation, and align their goals. 

This collaboration reduces miscommunication, identifies growth opportunities, and ensures that each team supports the broader business objectives. It also leads to more realistic forecasting, better resource use, and a more cohesive customer experience.

The Synergy Effect: How Alignment Boosts Sales

Imagine a world where sales reps have real-time access to accurate pricing and quoting tools, where finance has clear visibility into sales pipeline health, and where forecasts can be adjusted accordingly. This is the power of revenue operations and finance alignment.

Improved Forecasting Accuracy: With unified data from RevOps and finance, you can generate more data-driven and reliable forecasts. This empowers you to make informed decisions about resource allocation, hiring, and marketing investments.

Streamlined Approvals: RevOps can automate workflows and approvals, ensuring deals move through the pipeline faster. Finance can set clear approval criteria within the RevOps system, providing transparency and eliminating delays.

Enhanced Sales Productivity:  RevOps can equip salespeople with the tools and resources to close deals faster. Finance can give sales reps insights into customer payment history and creditworthiness, allowing them to tailor their approach.

Better Communication and Collaboration: Communication improves when RevOps and finance speak the same language (data!). Regular meetings and data sharing foster collaboration and a shared understanding of sales goals.

Unlocking the Power: Steps to RevOps-Finance Alignment

Achieving RevOps and finance alignment is an ongoing process, but here are some initial steps to take. 

Define Shared Goals: Establish clear, measurable goals for revenue growth, profitability, and customer satisfaction so both teams work toward the same targets. Aligning these objectives ensures that every action taken supports the overall business strategy.

Securing Devices and Protecting Data: With teams increasingly using the latest devices to manage critical business data, securing these tools is essential. Devices like MacBooks are primary tools for RevOps and finance teams that rely on accurate, real-time information to plan and forecast. Keeping data safe is crucial because if sensitive information falls into the wrong hands, it could compromise strategic decisions. An easy but effective measure is to lock screen on mac devices, preventing unauthorized access and securing critical information. These small steps, consistently practiced, help protect your business’s revenue stream and maintain efficient collaboration across departments.

Break Down Silos: Promote open communication and collaboration between RevOps and finance. Organize regular meetings, create shared dashboards, and break down departmental barriers. Transparency in objectives and challenges allows both teams to better understand each other’s roles and needs.

Standardize Data and Processes: Ensure both teams use consistent definitions and metrics for key data points like sales pipeline stages, deal values, and forecasting methodologies. This standardization eliminates confusion and enables seamless collaboration.

Invest in Technology: Implement tools that integrate RevOps and finance systems. Seamless data flow and minimized manual errors lead to faster decision-making and more accurate reporting. Unified dashboards can offer a comprehensive overview, ensuring that insights are readily available to both teams.

Promote a Culture of Data-Driven Decision Making: Empower both teams to leverage data insights when making sales strategies, resource allocation, and forecasting decisions. Providing training on data analytics tools can help staff develop the skills needed to interpret data effectively.

The Bottom Line: Enhanced Sales Performance

So, what does all this mean for your sales performance? Aligning RevOps and finance creates a seamless flow of information. This approach enables more accurate planning, efficient resource allocation, and improved customer experiences. The synergy between these two functions ensures that your organization is positioned to grow sustainably and adapt to changing market conditions.

Deciding who RevOps reports to within a company is a strategic decision that can significantly impact the company’s success.  

It’s also often a bit of a puzzle.

This relatively new function cuts across departments like Sales, Marketing, and Customer Success, challenging a clear reporting line.  

Furthermore, RevOps’ role and responsibilities might differ depending on the company’s structure (siloed vs. integrated departments) and size (startup vs. large enterprise). Adding another layer of complexity, industry priorities can influence who RevOps aligns with most closely.  

For example, a B2B SaaS company might prioritize sales enablement, suggesting the CRO as a potential reporting leader. In contrast, a B2C company focused on customer experience might position RevOps under the CMO.  

Because of these factors, there’s no one-size-fits-all answer. 

The optimal reporting structure hinges on each organization’s unique circumstances and goals. Below, we unpack possible RevOps organizational hierarchies according to various factors.

What Falls Under RevOps

Before discussing who RevOps reports to, let’s examine what responsibilities fall under the RevOps umbrella.

RevOps acts as a central nervous system for a company’s revenue engine, overseeing various functions and responsibilities that bridge the gap between Sales, Marketing, and Customer Success. 

These often include: 

• Process Optimization and Automation: RevOps identifies and streamlines processes across departments related to lead generation, qualification, nurturing, and deal flow. They also implement automation tools to improve efficiency and eliminate manual tasks.
• Data Management and Analytics: RevOps is crucial in collecting, analyzing, and interpreting data from various sources (CRM, marketing automation, customer support) to provide insights on campaign performance, sales pipeline health, and overall revenue generation effectiveness.
• Technology Implementation and Integration: RevOps ensures the seamless integration of various sales, marketing, and customer success technologies (CRM, marketing automation, helpdesk, sales compensation management) to create a unified data platform for improved visibility and communication across departments.
• Sales Enablement: RevOps empowers the sales team with the tools, resources, and content they need to be successful. This includes developing sales playbooks, training programs, and ongoing coaching and support.
• Metrics and Reporting: RevOps establishes key performance indicators (KPIs) for the revenue engine and generates reports to track progress toward goals. This allows for data-driven decision-making and continuous improvement across the sales and marketing funnel. Internally, they are often measured according to these RevOps metrics. 
• Governance and Communication: RevOps fosters collaboration and communication between Sales, Marketing, and Customer Success teams. They establish clear ownership and accountability for revenue-generating activities and ensure alignment with overall business goals.

RevOps professionals wear many hats and play a critical role in ensuring a smooth flow from attracting leads to converting them into loyal customers. They are the glue that keeps the revenue generation engine running efficiently and effectively.

Factors Influencing RevOps Reporting Structure

So, with those responsibilities supporting the GTM branch of an organization, where exactly does RevOps fit within a business’s departmental structure? The answer typically depends on the industry, company size and stage, and how said company is structured.

Industry, Size, and Stage

Industry trends and specific needs can shape who RevOps reports to. In a B2B environment, focusing on complex sales cycles and high-value contracts, RevOps might report to the Chief Revenue Officer (CRO) to ensure tight alignment with sales enablement strategies. 

Conversely, in a B2C company prioritizing customer acquisition and user experience, RevOps might report to the Chief Marketing Officer (CMO) to emphasize marketing campaign optimization and lead generation.  

High-growth tech startups might have RevOps report directly to the CEO for close collaboration in a fast-paced environment. Established enterprises with mature sales and marketing functions might create a dedicated Head of RevOps position reporting to the COO or CRO.

At QuotaPath, we have a VP of RevOps, who oversees the growth team, which includes sales and two RevOps managers. The VP then reports up to the CEO.

“I feel strongly that RevOps should have a seat at the leadership table. How this looks depends on the organization or company. For example, some larger companies have the VP of RevOps reports up directly to the CRO. When there’s not a CRO, I’ve seen this position report up to a COO. I don’t like the models where RevOps reports up to a function head like sales, marketing, or customer success because I believe this enforces silos that we in RevOps are trying to eliminate. I like the model where RevOps reports to the CRO or COO because it ultimately drives accountability, and the focus remains on what is going to be best for the company.”

 Matthew Volm, CEO and Co-Founder of RevOps Coop

Benefits and Considerations for Different RevOps Reporting Structures

While the ideal reporting structure depends on your organization’s specifics, here’s a breakdown of the advantages and potential drawbacks of RevOps reporting to different executives:

However, none of this is as important as clear communication channels and collaboration across departments. These are the most crucial factors for RevOp’s success. Regular meetings, shared dashboards, and open communication between RevOps, Sales, Marketing, and Customer Success ensure everyone is aligned toward achieving revenue growth.

Final Thoughts

Still here? Thanks for your time.

This blog taught us that there is no rule book for whom RevOps should report. However, the key takeaway is that the optimal structure depends on your unique organizational context. By carefully considering factors like industry, company size, and department structure, you can determine the reporting line that best positions RevOps to drive revenue growth.

Additionally, here are some best practices to keep in mind:

• Prioritize Alignment, Not Hierarchy: Regardless of the reporting structure, prioritize clear communication and alignment between RevOps, Sales, Marketing, and Customer Success. Foster a collaborative environment where all teams work together seamlessly.

• Data-Driven Decisions: Leverage data and analytics to track the effectiveness of your chosen RevOps reporting structure. Monitor key metrics and be willing to adapt as your organization and revenue goals evolve.

• Focus on Outcomes, Not Titles: Don’t get hung up on titles or specific reporting lines. The ultimate goal is to create a structure that empowers RevOps to contribute maximally to your company’s revenue generation efforts.

By implementing these best practices and carefully considering the factors discussed, you can ensure that RevOps plays a pivotal role in your organization’s success. Remember, a well-aligned RevOps function is a powerful engine for optimizing your revenue generation machine.

About QuotaPath

QuotaPath empowers RevOps professionals by streamlining commission calculations and providing transparency in sales compensation. This frees up valuable time for strategic initiatives and ensures alignment between sales efforts and overall revenue goals, allowing RevOps to focus on driving growth.
Schedule time with our team to learn how RevOps can use QuotaPath to build, test, measure, track, and predict the success and cost of their sales compensation plans.

This is a guest blog written by the Convoso Team.

Understanding and leveraging intent data is vital for enhancing sales strategies. Derived from online user behaviors, this information provides insights into prospective customers’ interests and readiness to purchase. 

By analyzing web searches, page visits, and content interactions, sales professionals can pinpoint where a prospect stands in the buying journey. This enables a more focused approach, ensuring efforts are directed toward leads with a known interest in particular products or services. 

Incorporating intent data into sales can sharpen your targeting precision and boost the efficiency of sales initiatives, paving the way for tailored communications that resonate with potential buyers.

Types of Intent Data (and How They Can Elevate Your Sales Performance)

Did you know that intent data could be pivotal for elevating sales performance in your business? Both search intent and engagement data enable greater precision in targeting and analyzing online behaviors to reveal the ‘when’ and ‘what’ behind customer searches. This insight can help you craft more effective marketing strategies that meet your prospects at their point of need.

For example, perhaps your data shows that existing supply chains are a pain point for potential customers. In this case, you could use your gathered information to create targeted content, such as an article on supply chain optimization examples, which you share on their most-frequented social platforms. 

Leveraging a supply of services agreement template for such content creation can streamline your process, ensure legal compliance, and maintain consistency in messaging. This approach saves time and minimizes legal risks associated with content creation, allowing you to engage your prospects effectively and confidently.

Firmographic and technographic data can offer another layer again, providing a granular view of a potential client’s company size, industry, technology stack, and more. Leveraging this information helps ensure outreach is timely, relevant, and tailored to address specific challenges and opportunities within the organizational and technological context. 

These types of intent data can form a comprehensive toolkit for sales professionals, driving efficiency and helping identify and convert high-intent leads.

How Intent Data Can Enhance Your Marketing 

So, how can intent data enhance your marketing? There are several different areas where it can come in particularly useful, including: 

Account-Based Marketing

Enhancing your account-based marketing with intent data can transform your targeting precision, spotlighting high-value accounts ripe for engagement. 

This approach relies on analyzing intent signals to identify businesses that are actively seeking solutions and then ensuring that marketing efforts are concentrated on prospects with a demonstrated interest in your products or services. 

Inbound Marketing 

Maximizing inbound marketing involves pinpointing evolving consumer behaviors and creating content that resonates with shifting preferences. For example, you might identify hybrid shopping as an emerging trend in your industry and try to craft a blend of online and offline experiences for potential customers. 

Similarly, phygital marketing strategies might utilize intent data to seamlessly integrate digital and physical marketing efforts, ensuring personalized and timely messages. 

By leveraging intent data in this way, marketers can craft strategies that are not only relevant but highly engaging, driving superior customer experiences across various touchpoints.

Optimizing expenses plays a crucial role in industries heavily reliant on transportation, such as logistics or freight. Fuel cards for truckers, for instance, can significantly reduce fuel costs and streamline expense management, offering a tangible example of how data-driven insights extend beyond marketing to operational efficiency.

How to Create an Effective Sales Report

More guest content from Convoso

Read Blog

How Intent Data is Being Used in Sales and Marketing Tactics

Now, let’s dig down into the nitty-gritty of the matter and examine some of the specific ways that intent data is used in modern sales and marketing. 

Utilizing intent data involves tapping into prospective customers’ minds, providing a wealth of valuable insights that can enhance sales and marketing efforts. This strategic approach isn’t just a passing trend but a major shift in how businesses can anticipate and meet the needs of their target audiences. 

For instance, implementing budget vs actual analysis alongside intent data can offer a comprehensive view of customer behavior and expenditure patterns, aiding in more informed decision-making processes.

Some of the ways intent data is being used in this context include:

Lead Prioritization

Imagine being able to sift through a sea of leads to find golden prospects whose digital footprints signal a readiness to leap. 

This is the promise of leveraging intent data for lead scoring. By peering into potential customers’ digital behaviors and search patterns, businesses can identify and focus their energies on those who aren’t just interested in their products but are poised to purchase. 

This isn’t only about efficiency; it’s about honing your precision and effectively targeting customers.

Appointment Setting Optimization

For sectors like solar energy, where the audience pool is vast yet the truly interested are a select few, intent data is also the compass that can guide marketers to increased solar leads appointments, for example.

By pinpointing prospects actively exploring solar solutions (or other equally niche products), businesses can curate highly personalized and relevant appointments, turning curiosity into concrete sales opportunities and reducing the time wasted on leads that were never going anywhere.

Content and Ad Strategies Reimagined

Using intent data as their primary metric, your content and advertising can transform into mirrors that reflect your audience’s desires and curiosities. 

This data-driven alchemy allows marketers to craft messages and visuals that resonate more deeply, creating a magnetic pull toward your brand. It’s about crafting a dialogue, not a monologue, with content that speaks directly to the heart of your audience’s interests.

Automated Appointment Booking 

In the search for more efficiency and lower business expenditure, AI appointment booking technology is a practical solution for businesses looking to stay ahead. These intelligent systems can analyze when prospects are most likely to engage, ensuring interactions are timed to perfection. 

This seamless blend of technology and insight makes every sales encounter not just a meeting but an opportunity ripe for conversion.

A Personal Touch at Scale

Personalization is central to elevating sales outreach from good to great, with the additional benefit of promoting a more motivated sales team as conversion rates climb through properly utilizing this concept. 

Intent data allows sales professionals to tailor their communications precisely, addressing each prospect’s unique interests and concerns. This bespoke approach transforms outreach into the key that unlocks deeper engagement and higher conversion.

Supercharged Direct Email Campaigns 

Intent data takes the guesswork out of email marketing, allowing for campaigns that hit the mark every time. 

Say you’re promoting your voicemail drop service. By understanding the pulse of your audience’s interest, marketers can segment communications with unparalleled precision, leading to emails that aren’t just opened but acted on. 

It’s about turning prospects’ inboxes into a gateway for engagement and growth.

Strategic Account Targeting

Imagine if you could read the minds of your prospective clients, knowing exactly when they’re in the market for your services. Maybe they’re experiencing particular pain points when it comes to their audit trails and could do with some specialist software to help them. Intent data can make this a reality through predictive analytics. 

By analyzing patterns in web behavior, such as frequent visits to specific product pages or engagement with related content, sales teams can identify which businesses are in the buying window for their solutions and even how to encourage retention in the long term. 

Whether you’re targeting potential customers browsing eCommerce websites or those seeking specific solutions, leveraging intent data ensures that your messaging resonates with their needs and preferences.

This allows for a more proactive approach, where sales efforts are concentrated on accounts showing real interest, significantly increasing the likelihood of converting these prospects into customers. It’s about being in the right place at the right time, armed with the right offer.

Enhanced Customer Journey Mapping

With intent data, the customer journey transforms from a guesswork-driven path to a well-lit runway for targeted sales strategies. By understanding the specific touchpoints where potential customers show the highest engagement, teams can tailor their outreach, ensuring every communication is relevant and timely. 

This level of customization enhances the buyer journey, making it more likely that a prospect will proceed to the next stage. It’s akin to having a personalized roadmap for each potential customer, ensuring every opportunity for engagement is noticed.

Competitive Intelligence

In addition, knowledge of your competitors’ moves can provide a strategic advantage in high-stakes sales. Intent data sheds light on when prospects want to buy and what other solutions they’re considering. 

This invaluable competitive intelligence enables teams to fine-tune their pitch to highlight their unique value proposition and differentiate their offerings from the competition. It’s about turning the competitive landscape into a canvas, where informed sales strategies paint a compelling picture of why your solution stands out.

Optimizing Sales Resource Allocation

Finally, one of the challenges in an effective sales team structure is optimizing resource allocation to ensure the highest return on investment. Intent data acts as a strategic filter, highlighting leads with the greatest potential for conversion. This ensures that sales resources are focused on nurturing these high-value prospects rather than being spread thin across less-promising leads. 

Moreover, intent data can identify cross-selling and upselling opportunities within your existing customer base, maximizing sales efforts. It’s about making every call, email, and meeting count and ensuring sales resources are invested where they’ll yield the most significant impact.

The strategic incorporation of intent data into sales and marketing tactics isn’t just an upgrade—it’s a revolution. It’s about moving beyond the traditional spray-and-pray approach to a world where every message, outreach, and campaign is a finely tuned arrow aimed straight at the heart of your audience’s needs and desires. 

The businesses that master this art will not just survive the modern age but thrive, setting new standards for connecting, engaging, and converting in the ever-evolving digital marketplace.

Conclusion: The Transformative Power of Intent Data in Sales

Intent data has revolutionized sales performance by offering deeper insights into buyer behavior, enabling sales teams to identify high-intent prospects and tailor their outreach accordingly. 

This strategic advantage allows for more focused and efficient sales tactics, significantly improving conversion rates and optimizing the sales pipeline. 

Embracing intent data analytics thus empowers organizations to future-proof their sales strategies, ensuring they remain competitive in a rapidly evolving marketplace. 

Sales commissions are a powerful motivator, but a poorly managed commission tracking system (whether manual or software) can lead to frustration, confusion, and even mistrust from your revenue team.

This mistrust can end in rep turnover, with 9% of reps quitting over a commission dispute, according to our 2024 study. 

Think about it.

A star salesperson exceeds their quota by a mile, only to face delays or discrepancies in their commission payout due to unclear guidelines or manual calculations. Conversely, a well-oiled commission tracking system with clear rules, real-time data access, and consistent payouts can unlock peak performance and a highly motivated sales force.

Here’s why mastering sales commission tracking is crucial:

• Transparency and Trust: A clear and documented commission plan with readily available data builds trust and empowers reps to focus on closing deals.
• Motivation and Efficiency: Real-time commission progress keeps reps engaged and allows them to adjust their strategies for maximum earning potential. Sales commission tracking software eliminates time-consuming manual calculations, freeing up time for selling.
• Fairness and Accuracy: Standardized deal qualification and detailed deal tracking ensure everyone follows the same rules and that commissions are distributed accurately. Plus, regular audits maintain a system of checks and balances following ASC 606.

In a worst-case scenario, your top-performing rep will join the 9% of reps who quit after too many inaccurate commission checks. Another worst case? When a company tries to cap commissions in response to a rep closing a bluebird deal (a large outlier deal), refusing full payouts, and breaking the original rules laid out in their commission policy.

Conversely, a company that adopts commission tracking best practices paired with fair, logical, and competitive compensation structures can recruit and retain some of their best sellers. 

10 Commission Tracking Best Practices

By incorporating these best practices, you can transform your commission tracking system from a source of friction to a powerful tool that fuels sales success.

1. Clearly Defined Commission Plan: Ensure your sales team has a clear and documented understanding of the commission structure. This includes details like:

• Earning potential (base salary + commission)
• Commission rates (percentage of sales or tiered structure)
• Defined qualifying factors for commission payouts (e.g., closed deals, upsells, demos booked)
• Note: It’s also a best practice to provide documentation that breaks down their plan, plus when and how they are paid. Learn more about QuotaPath’s Plan Verification. 

2. Technology: Implement and integrate a CRM with commission tracking software ​​to automate data collection and minimize manual calculations. This will reduce errors and streamline the process.

• If you’re not ready to implement compensation management software, standardize manual tracking by downloading our Google Sheets Commission Template. This will ensure your reps aren’t building their own spreadsheet with flawed logic. (Learn more about how QuotaPath integrates with Google Sheets.)

3. Real-Time Data Visibility: Provide sales reps access to their commission progress and key metrics. This transparency fosters motivation and allows them to adjust their strategies if needed.

• “Our reps realized they could run scenarios and see how much they could earn from our monthly kickers,” said Joe St. Germain, VP of Sales at Blackthorn. 

4. Standardized Deal Qualification: Establish clear criteria for a qualified deal that triggers a commission payout. This ensures fairness and consistency in commission calculations.

5. Detailed Deal Tracking: Maintain a detailed record of each deal’s progress, including customer information, quote details, and relevant milestones. This provides a clear audit trail for commission calculations and dispute resolution.

6. Win/Loss Reporting: Track wins (closed deals) and losses to identify trends and areas for improvement. Analyze reasons for lost deals to determine potential adjustments to the commission structure or sales training needs.

• Read more RevOps best practices.

7. Regular Commission Payouts: Establish a consistent and timely payout schedule for commissions earned. This predictability motivates reps and demonstrates the company’s commitment to fair compensation.

• Later-stage companies typically schedule commission payouts at the start of the contract, while early-stage companies paying close attention to cash flow will schedule payments upon receipt of invoice payment.
  • 5 RevOps leaders share commission payment terms tips

8. Commission Cap Considerations: Don’t do it. If you have a rep break the comp plan with an exorbitant payout, pay the rep and adjust the subsequent plans to protect it. 

9. Internal Controls and Audits: Maintain a system of internal controls to ensure accuracy in commission calculations. Regular audits can identify potential discrepancies and maintain trust in the system. This is a commission tracking best practice and an accounting liability if you fail to comply with ASC 606. 

10. Open Communication: Maintain open communication with your sales team regarding the commission structure and any changes or updates. We recommend checking out this blog to learn best practices for communicating a new comp plan with your team.

Address concerns promptly and foster a transparent environment.

• Communicate and document the same message every time you review the plan. 
• Use multiple formats to explain the new plan.
• Provide an FAQ document.
• Share commission calculation examples.
• Communicate the reasons and advantages of plan changes and how the company plans to support reps through these changes.
• Avoid confusing or vague language.
• Explain how achievement relates to earnings.

Conclusion: Streamline Commission Tracking 

To wrap up, a well-designed commission tracking system isn’t just about numbers; it’s about empowering your sales force and fostering a culture of trust and high performance. 

Implement the above best practices to boost sales motivation, increase efficiency and accuracy for your accounting and RevOps teams, and minimize disputes. 

To eliminate the time investment and formula-filled work required to set your commission spreadsheet, check out QuotaPath for streamlined workflows. You can sign up for a free trial or schedule time with our sales team for a custom demo. 

See how real-time data, automated calculations, and customizable dashboards transform your commission tracking from a headache to a sales performance driver.

In your first year as a startup, your finance operations can survive with a good, solid bookkeeper and cash-based accounting.

However, the minute you start raising money, it’s best practice to bring on someone who knows GAAP accounting and can convert the company to accrual-based accounting.

That’s according to Amy Walker, CPA, Co-Founder & Director of CAS at Walker Glantz, who recently spoke on our webinar, Early Stage Finance Foundations: Strategies, Compliance, and Sales Compensation Manager.

Joining Amy included Jonathan Cochrane, CPA 🚀, VP of Strategy at Maxio, hosted by AJ Bruno, QuotaPath CEO and Co-Founder.

Leaders and finance professionals at early-stage companies joined us as we discussed the complexities of finance, compliance, and sales compensation management.

This session provided guidance and best practices for establishing strong financial pillars before compliance concerns emerge. Plus, we discussed what makes a solid financial infrastructure, technologies to consider, how to mitigate audit risks, and scaling efficiently.

Watch the full recording below, and read on for key takeaways.

Building a Solid Financial Infrastructure

In the early days, startups experience countless things happening at once, from fundraising to scaling hires and payroll. Establishing effective bookkeeping and record-keeping processes early on is crucial.

“My first advice is to not cheap out on your bookkeeping. You need to have a bookkeeping solution in place from the beginning. The more experienced person you have will cause less friction later because they can grow with you,” Amy said.

“They have the skills. They know how to take you from cash to accrual, how to start documenting processes automatically, and when a new process needs to be put in place.”

According to Amy, “You can get away with cash-based books your first year,” which means you don’t count revenue until you receive payment. However, when more sales trickle in with consistency, you should switch to accrual-based books to ensure you have a solid system in place for revenue recognition.

Additionally, one of the key financial processes to prioritize in the early stages of a startup involves accurate and consistent reporting.

“Producing reliable financial statements early and often, billing customers on time, collecting cash on time, and segmenting your reports are foundational to your success as a business,” said Jon.

“Producing reliable financial statements early and often, billing customers on time, collecting cash on time, and segmenting your reports are foundational to your success as a business.”

Jon Cochrane

Streamlining Finance Operations with Technology

The conversation also touched on what finance technology to prioritize as a company scales.

Technology offers automation, data accuracy, real-time reporting, and data access so you can make the most of your lean resources. It reduces errors, ensures compliance, and boosts bookkeeping, payroll, and GAAP compliance efficiency.

“There used to be offices full of people that processed payroll or made tax filings. You can do that now with software,” Amy said.

We discussed the types of technologies to consider and their suggested order of implementation.

“A good outsourced service is going to know when to layer on technology to help you continue to use outsourced services,” said Amy.

QuickBooks topped the list as a general ledger system. “I wouldn’t start with the free ones,” Amy stated, “They’re not going to grow with you and you’re just going to end up redoing things.”

Commission Tracking with QuickBooks

QuotaPath integrates with QuickBooks to streamline commission calculations and schedule and amortize payments.

Learn More

Next, you need to layer on a payroll solution.

“We start everybody on Gusto. Then if employee disbursements are all over the country, we love Rippling,” Amy shared. “They integrate with QuickBooks and automate as much as possible.”

CRM

After bookkeeping and payroll, you need a CRM.

“The two that we see most commonly in the market are Salesforce and HubSpot,” according to Jon. “They’re great solutions. HubSpot seems a bit more friendly. Salesforce, there’s a learning curve.”

When you have 25 customers on a monthly subscription, it is a good time to consider a billing solution. But make sure to evaluate how you want to spend your time.

“That’s 300 invoices per year that you have to make sure you get paid for,” Jon pointed out. “You’re trying to grow your product. The last thing you want to do is chase your customers down for payment on those invoices for a service you’re doing.”

He continued, “I think that making sure that your cash engine is operating smoothly is the main point when it comes to billing.”

Commissions

Commissions “tend to get forgotten,” AJ said. “It just gets passed around. Commissions are payroll. You don’t run payroll out of a spreadsheet, why would you run commissions out a spreadsheet if it’s part of payroll?”

Amy discovered QuotaPath when a client asked her to check it out for them. “Like any good technology, it changed our mindset,” Amy explained. “The beauty of it was that the review period with the sales rep went away because they had a real-time view into what they were earning. We were all seeing the same thing.”

FP&A and ERPs

An FP&A solution and an ERP are “solutions that you look at once you’re at that $10 million and beyond level,” according to Jon. An FP&A is about having good metrics, understanding what’s going on in the business, and what the drivers are to help with future planning.

“It’s time to think about an FP&A solution once you start driving budgets down to individual owners who manage their own P&L,” Jon said.

According to Jon, “You need to seriously start looking at an ERP when you have multiple business entities that need to be consolidated and/or international accounting.”

Technology improves efficiency and reduces errors. It allows you to do more with fewer resources by automating tasks that increase accuracy and compliance with rules like ASC 606.

Using spreadsheets for ASC-606 revenue recognition can get very messy quickly when “you layer on early renewals, contract cancellations,” according to Amy. “When you’re doing all that in a spreadsheet, you better have somebody with a steel trap mind to remember all those details. That’s when you start bringing in tech to help do the job.”

Amy shared that onboarding is essential to saving time. Although setting up new technology takes time, “If it’s onboarded right, it should buy you time in the long run,” Amy said.

Technology reduces errors in bookkeeping and increases the accuracy of commissions too. With QuotaPath, “We didn’t have to have that inherent double triple check because we might make a mistake,” Amy said.

Mitigating Audit Risks

Early-stage companies face the most common audit risks related to bookkeeping, compliance, and documentation. According to Jon, “The number one cause of failed funding rounds are accounting mistakes,” and those are completely avoidable for companies.

“ASC 606 can be a bit like the boogeyman,” Jon said.

The challenge is that people know they need to be compliant but don’t know what that means.

“The revenue is common to everyone. It’s recognizing the commission expense over the life of the same contract that trips people up,” according to Amy.

Recommended reading: 5 Tips for a Successful Startup Audit (Blog)

During the discussion, Amy and Jon shared some best practices for minimizing audit risks.

“The minute you start considering outside funding, you need accrual-based books that are GAAP compliant,” Amy explained. If commission is paid along with revenue generated, you need to think about how you’re going to account for that. You need to put a policy in place and consistently apply it.”

Failure to do so means non-compliance with ASC 606 and can result in a hefty fine.

To avoid accounting mistakes like these and position yourself for the next stage, address controllable factors like “making sure that you have a bookkeeper. If you’re a small firm, it’s money well spent,” according to Jon. “They will save you a boatload of problems down the road, and they also know the issues that could come up that really get you into trouble.”

“ASC 606 involves recognizing both revenue and expenses over the proper period of a SaaS or enterprise contract. Software like Maxio and QuotaPath automates those calculations to keep you compliant,” Amy shared.

Proper documentation is essential to audit preparedness. During a due diligence audit, “they’re going to want to see you have a solid set of books, you have a closing process, you have SOPs in place for your accounting function, and that you’ve got the proper controls in place,” according to Amy, “That lets people have faith in you and what you say your business is doing.”

Therefore, “A bookkeeper is your foundation. If your bookkeeping isn’t right, the rest isn’t right. Everything that the staff accountant, controller, and CFO touches relies heavily on accurate bookkeeping,” Amy said. 

If you have a good accounting system in place, you’ll find errors early and be able to correct them sooner rather than them being found during an audit.

Efficiently Scaling Finance Operations

Scaling financial operations alongside business growth can be accomplished with an outsourced accounting function.

“We’ve got some clients who have been with us for eight to nine years, but we’re not the only ones in there. After round one, the board usually requires that you put a CFO on your payroll. The accounting function then supports the CFO,” Amy said. 

You will get a full-time controller after round two, A, B, or C. The billing part is huge, too, depending on its complexity. So, you build up and then start carving out the work.

Maintain financial efficiency as the company expands by including your outsourced accounting function in your management meetings. “Let them be part of your team, not just the service you use,” Amy suggests. They’ll get more efficient the more they know your business.”

However, “when the outsourced function is slowing you down, it’s time to start layering on more GNA costs and building out your accounting department and efficiency,” Amy said.

Building a scalable financial team starts with a firm foundation. Hiring a more experienced bookkeeper or using a knowledgeable outsourced accounting function helps you avoid the “confusion of switching accountants while you’re in a growth spurt.”

Then layer on automation as you scale to ease growing pains and enable you to do more with fewer resources. Jon suggests you evaluate how you want to be spending your time. Would you rather be “Following up on invoice collection,” Jon asks, “or running my business and having automated ways?” Think about getting the best return on your skills and talents. Then if you need additional input, “reach out to your network,” Jon said. “There are people who can help you figure out what is the next step.”

Conclusion

A startup must build a strong finance operations infrastructure from the beginning. Otherwise, problems can develop and snowball very quickly.

It’s foundational to start with an experienced bookkeeping solution at the onset. This sets you up for long-term success as you scale your business and helps you avoid costly accounting errors.

Technology is essential for streamlining your finance operations. It offers automation that boosts efficiency and accuracy, enabling you to make the most of available resources and helps ensure compliance with rules like ASC 606.

Access the complete webinar recording to hear the entire discussion and start automating commissions with a free trial of QuotaPath.