Calculating Commissions in NetSuite

How does your commissions calculation process currently work? Does it involve many spreadsheets and extracts from your CRM and ERP which need to be matched and checked against each other? Just when you think you have it nailed does management come in and make it even more complicated. Motivated salespeople are the bloodline of the business after all!

 

If you are a NetSuite user are you aware that there is a commission module that can be used to calculate commissions for you? It works in a similar way to advanced revenue management in that rules are setup as commission schedules which re applied to events to create commission plans. These commission plans are then assigned to a sales rep. The rules are applied to transactions which result in commissions being calculated.

 

The advantages of NetSuite Incentive Compensation Management include:

 

  • You can apply multiple rules to a sales rep. For example, commissions can be calculated based on total performance, performance on key products and over-performance against target.
  • The accounting can be automated, and you will not need to import and export data.
  • Sales reps can log in and see how commissions they are due in advance of payment increasing visibility.

Configuring Commissions in NetSuite

 

To enable the commission functionality in NetSuite, use the Incentive Compensation Management module, an additional feature for NetSuite customers. This feature allows easy payment of commissions to sales reps/partners, handled within NetSuite.

 

Steps to Enable and Configure the Commission Module:

 

  1. Request the Module: Contact your NetSuite account manager to provision the module.
  2. Enable the Feature: Navigate to Setup > Company > Enable Features > Employee subtab > Enable Employee Commission.

 

Setting Up Employee Commissions:

 

  1. Commission Preferences: Set up commission preferences at Setup > Sales > Sales Management > Commissions. These preferences determine how and when you pay commissions, affecting all setups in your NetSuite account.
  2. Create Commission Schedules and Plans: Navigate to List > Commissions to create employee schedules and plans. Commission schedules define rules for commission calculations, such as total sales, percentage of quota met, quantity sold, total profit, or profitability. Multiple schedules can be included in a single plan, assigned to sales reps. However, a sales rep cannot be assigned to more than one commission plan for the same date range.
  3. User Eligibility: Ensure only users with sales roles can see quota, forecast, and commission data. Assign the necessary permissions for managing commissions.

 

 

Commission Preferences Configuration:

 

  • Commissions Paid By Default On: Choose when commissions are paid—collections, billings/bookings, or a proportion of both.
  • Allow Overwrite in Schedules: Enable this if you want the flexibility to overwrite commission schedules.
  • Commission Eligibility Period: Define the number of days after billing or collections that sales become eligible for commission.
  • Calculate Commission on Shipping Items: Include shipping costs in commission calculations.
  • Require Accounting Approval: Decide if your accounting department must approve employee commissions.

 

 

Creating and Assigning Commission Plans

 

  • Create Schedules: At List > Commissions > Employee Schedules > New, define how commissions are calculated.
  • Assign Plans: Combine schedules into commission plans and assign these to sales reps at List > Commissions > Employee Plans > New.

 

Authorizing and Approving Commissions

 

The sales supervisor confirms commission amounts and creates a commission payable transaction. You can set a preference to require accounting approval for these transactions:

 

  • If this preference is disabled, authorization directly approves a cheque for payment.
  • If enabled, the commission goes to an accounting approval queue before cheque preparation.

 

 

Payment: Pay the sales rep using Transaction > Payables > Pay Bills.

 

Commission Reports

NetSuite provides comprehensive commission reports showing commissions for each transaction by sales rep, across all levels of the sales staff hierarchy. These reports are crucial for tracking and managing commission payouts efficiently.

If you are looking to streamline the commission calculation process, reduce errors, and ensure timely and accurate payments to your sales team NetSuite incentive compensation module could be the tool you need. Get in touch to speak to one of our consultants if you would like more information.