The importance of commission planning on company results
To fail to prepare is to prepare to fail. That’s as true in business as anywhere else in life, particularly in regards to financial planning. Any dollar allocated in one area is a dollar that can’t be spent elsewhere, and there are times when that’s problematic. That’s why due consideration is required for any financial commitments, including commission planning.
Commission planning can be a difficult balancing act. It needs to be appealing to the salesforce, providing sufficient incentive, but it also has to ensure customer service and business performance aren’t negatively impacted. And, of course, once a commission level has been set, it’s incredibly difficult to lower it without tipping over the apple cart of staff morale.
Needless to say, then (but we’ll say it anyway), it’s better to get it right in the first instance - and that’s what commission planning is for.
How Vena drives results through commission planning
When it comes to finances, data analysis is king. That’s as true for commission planning as it is for financial modeling and business intelligence, both of which utilize company-wide data sources to make key decisions to move the business forward.
A great starting point is performing a breakeven analysis. Many companies use Excel for this, although dedicated FP&A software can save significant time and frustration while yielding more accurate results. In either scenario, though, the analysis informs decision-makers of the necessary decisions that will ensure cash flow remains at a breakeven level. The obvious ones are sales volume and profit margin, but compensation packages including commission can have a significant impact, too.
Using the analysis results, decision-makers are able to manipulate the figures in different ways to determine the impact on the company’s bottom line. Reducing the commission rate may increase profits if sales volume stays consistent, for example, but if it led to a drop in new orders it could cause a revenue drop.
For quick and accurate scenario planning such as this, Vena’s software comes into its own. Performing similar tasks in Excel would take many days, perhaps weeks - and that’s after the manual, arduous task of collecting the data in the first place. This isn’t the case with Vena.
Because it collects multiple data sources from around the company and consolidates them into a central database, Vena provides access to a single source of truth. With it, team members have almost unlimited power for financial tasks, including commission planning. The flexibility means different compensation plans can be reviewed and considered, from tiered commission to salary and commission combinations, or even variable-rate commission.
Ultimately, Vena gives choice, control, and flexibility - instantly, 24/7.
Incentive compensation management: Vena Path
Vena Path enables companies to manage end-to-end process for sales compensation planning, reporting and analytics. Featuring prebuilt compensation planning logic and calculations, input templates, and comprehensive reporting, Vena Path makes planning simple.
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