Having a great product isn’t a given that it’ll be successful and will earn you a lot of money. To do that, you need a group of people that can convince potential customers to buy the product and bring revenue to the company. Sales can be a very harsh and demanding profession, and organizations may choose to employ external agents to explore and capture the potential in its entirety. These agents are not salaried, and the only things that keep them interested in the game are agent commissions.
What is Agent Commission, and Why is it Important?
Agents are outside contractors or third-party people who are responsible for selling the products and services to a consumer or helping the consumer in solving their queries. They can be on-field agents working in real estate, insurance, retail, and various other businesses or support executives working in a call centre. Agents, unlike sales representatives at a company, might not have fixed targets and are compensated through commissions they earn by selling a product or a service.
This commission is called the Agent commission. In this form of payment, for every successful transaction or deal an agent does, he receives a percentage of the total transaction value. This commission is a great way to motivate agents to work harder and do more deals.
How Much Commission Can an Agent Earn?
There is no set formula or limit to how much commission an agent can earn throughout his lifecycle. The percentage changes for different industries, companies, and job stages as well. Even in the same organization, there can be different commission schemes for different products or services, making it harder to predetermine the total commission an agent can earn.
For instance, insurance agents get paid a commission based on the kind of product or service they are selling; a policy with a specific sum assured and ongoing premium takes insurance as an example. They can also be paid on the number of policies sold, renewals, top-ups, and more. This may also lead to a lot of differences in the final commissions of two agents working at the same level as well.
Different Commission Issues
Tracking, calculating, and disbursing commissions to every agent can be a tough task, especially if you’re using legacy systems and manual processes. Incorrect data entry and delayed data collation can lead to delayed, erroneous pay-outs and, furthermore, may lead to immense dissatisfaction and demotivated agents. Here are some of the most common problems related to commission:
1. Legacy Systems:
Traditional methods of tracking and calculating commissions are time-consuming, unreliable, and prone to errors. Legacy systems are hard to maintain and harder to maintain and collect information from. Commission calculation can take a lot of time through this method and can be calculated incorrectly as well. For a commission plan containing too many variables, legacy systems are not the best way to calculate accurately as they are not architected to handle complex scenarios.
2. Shadow Accounting:
Since agents work hard to convert a lead into a customer, they expect their commission to be calculated correctly, quickly and paid timely as well. With late and incorrect payments, agents can turn towards shadow accounting their earnings by themselves to calculate what commission they’ll earn. Not only does it take away valuable time from those agents, but it also creates a sense of mistrust in the company and can lead to the top hires leaving for greener pastures.
3. Increased Auditing:
Legacy systems lead to a lot of manual work, which increases the need for project management. Any type of inconsistency or disparity can lead to increased attention from the boardroom and auditors. While auditing helps in keeping the financial health of the company in check, it can be invasive and disruptive to the work. The more manual work, the longer the auditing will continue.
What is a Commission Management Software?
Commission management software is a simple platform that makes it easier to track, process, manage, and disburse agent commissions in a simpler and more efficient manner. The sales department can easily keep track of a sales rep’s activities and ensure they are being properly compensated for their work.
Managing agent commissions can be a complicated process and is the biggest reason why companies sought to outsource this process to a third party rather than dealing with it in-house. It can take a lot of time, is cumbersome to do, and can consume a lot of resources for a company. Resources that can be well spent somewhere else. Commission management software streamlines, and automates the commission process and provides a number of benefits to an organization.
Benefits of a Commission Management System
1. Increased Accuracy
For a system that relies heavily on data, accuracy is vital. Although you may not lose millions of dollars due to some data entry error, it can still cost significantly. Research says these errors can lead to up to 7%-8% of monetary losses. Commission management software can help maintain the accuracy and reliability of data across all channels and vertices of the sales channel. It makes it easier to maintain information like the total number of sales done by an agent, the number of new customers added, revenue generated for the company, and more which are essential in calculating the final commission for that agent.
2. Greater Efficiency
A single centralized commission management software that can integrate with your sales, HRMS, and finance CRMs can automatically collect information and calculate agent commissions more efficiently. Manual processes take a lot of time to calculate commission payments, and there are chances that the calculation can also be incorrect. Commission management software, however, pulls relevant information from upstream systems in real-time and calculates the commission instantly. There is a lot of time saved, and since mistakes are fewer, there’s no need to repeat the process once again. This also leads to an increase in the time available for studying, simulating, and re-designing the agent commission plans for optimal performance.
3. Improved Performance Tracking
While legacy systems can keep a record of how much sales and revenue an agent has generated, it doesn’t have the ability to provide an in-depth analysis of the agent’s performance on a regular basis. Agents strive for a report card of their performance to know where they are performing better and which areas they are lacking.
With commission management software, agents can get information about their total commission earned, annual targets, performance by territory, products, and more forward-looking metrics like earning potential. Agents can leverage this information to improve their performance and earn more commission. Not just individuals, it tracks the performance of a team or sales group as well.
4. Stay Updated with the Market
A sales commission software not only allows you to track the performance of your agents but also allows you to benchmark it against industry standards. Business leaders can make an informed decision about the ability of their sales team with respect to the market and whether an improvement is required. They can also analyze and identify the top performers in their team and make necessary adjustments to remain competitive in the market.
5. Cost Reduction
Maintaining a mountain of manual work requires a lot of time from dedicated people. Hiring these people takes a lot of money, and it still can’t ensure that commission calculations will become faster or more accurate. Inaccurate calculations not only cost valuable money but also mean that the time spent doing that calculation was worth nothing. A commission management software streamlines the calculation process and reduces the time it takes to disburse the final commission. It also reduces the cost as there’d be less paperwork and fewer people required to handle that paperwork.

How to Choose a Commission Management Software
It could require a substantial amount of investment to implement commission management software in your business, and hence it is important to choose the one that is best suited for your business. Here are some factors that you should consider while selecting commission management software.
1. Easy to Use
The sales commission software should not just look good but should be intuitive to use as well. You wouldn’t want to spend much time learning how to use the interface and get the desired results. The commission management software should be easy to understand and use by the sales team so that they can fetch any report or information whenever needed and keep their eyes on the target.
2. Integration Capabilities
Commission calculation is not the only thing that the software needs to do. An ideal commission management software should be able to integrate with different aspects of the sales pipeline, collect every information necessary, and calculate the commission as well.
3. Performance Tracking
Your sales team will use the software to gauge their performance and bring improvements. Hence the software must have enhanced tracking capabilities. You should be able to identify your best and worst performers, the performance of a team, territory-wise distribution, pending commissions, and more.
4. Budget-Friendly
The whole aim of commission management software is to make your commission calculation process more efficient and help in reducing overall costs. This doesn’t mean that it is necessary to have software in place, even if you are just a small company having a handful of sales reps. It is important to understand your current business scenario and go with options that fit within your budget.
