How to calculate commission: a step-by-step guide

Calculating commission is an essential task to keep a sales team motivated and to ensure a company's financial health. However, many organizations still face challenges in this process, ranging from calculation errors to payment delays.

In this complete guide, you will learn how to structure and optimize your commission calculation and discover the best practices to automate the entire process.

Understanding the types of commission

Before calculating commission, it is important to understand the different types of structures available:

• Fixed commission: a fixed percentage on each sale made;
• Tiered commission: a percentage that increases as sales volume grows;
• Mixed commission: combines a base salary with a percentage of sales;
• Profit-based commission: calculated on profit, not on the total sales value;
• Accelerator commission: offers bonuses upon reaching specific targets;

How to calculate commission: a step-by-step

To precisely calculate commission, follow these fundamental steps: 

1. Define the calculus base

• Determine whether it will be based on total value, margin, or profit;
• Establish which products or services are commissionable;
• Define the evaluation period (monthly, biweekly, etc.).

2. Establish rules

• Applicable percentages;
• Minimum goals for commission eligibility;
• Special conditions (such as commission splits);
• Refund and cancellation policy.

3. Organize data

• Register every sale from the established period; 
• Verify clients’ payment status; 
• Document order alterations or cancelations. 

4. Calculate

Let’s see practical examples for each type of commission:

Fixed commission

Example: salesperson with a 5% commission on sales.

• Formula: sales value × commission percentage
• Practical example: Sale of US$ 10,000 × 5% = US$ 500 commission.

Tiered commission

Example: progressive structure based on monthly volume.

• Up to US$ 50,000: 3%
• US$ 50,001 to US$ 100,000: 5%
• Above US$ 100,000: 7%

Practical example: a salesperson who sold US$ 120.000 this month

• First US$ 50,000 × 3% = US$ 1,500
•  Next US$ 50,000 × 5% = US$ 2,500
•  Last US$ 20,000 × 7% = US$ 1,400
•  Total commission: US$ 5,400

Mixed commission

Example: base salary of US$ 3.000 + 2% over sales

• Formula: base salary + (total sales value × percentage)
• Practical example: US$ 3.000 + (US$ 100.000 × 2%) = US$ 5.000 total

Profit-based commission

Example: 10% on the profit margin. 

• Formula: (price of the sale - cost) × percentage
  
  Practical example:
• Sale: US$ 10,000
•  Cost: US$ 7,000
• Margin: US$ 3,000
• Commission: US$ 3,000 × 10% = US$ 300

Accelerator commission

Example: 3% base + bonus when a goal is reached. 

• Monthly goal: US$ 100.000
• Commission base: 3%
• Accelerator: +2% when the goal is reached 

Practical example: salesperson who sold US$ 150.000.

• Commission base: US$ 150.000 × 3% = US$ 4.500
• Accelerator: US$ 150.000 × 2% = US$ 3.000
• Total: US$ 7.500

5. Validate your results

• Compared to previous periods;
• Verify inconsistencies;
• Document the entire process.

Important validation tips:

• Keep a history of previous calculations for comparison;
• Verify if the accelerators were applied correctly;
• Confirm if all special rules were considered;
• Document exceptions or special cases;
• Double-check high-value commissions.

Tips to optimize the commission calculating process

Check out the main tips to optimize your commission management:

Establish a fixed calendar

• Define clear dates for closing; 
• Communicate deadlines in advance; 
• Maintain consistency in processes.

Document all the rules 

• Create a commission manual;
• Keep track of alterations;
• Share information with your team.

Invest in automation

A commission management software is fundamental to: 

• Eliminate calculation errors;
• Reduce processing time;
• Increase transparency;
•  Facilitate audits;
• Generate automatic reports.

Monitor and adjust.

• Track results regularly;
• Collect feedback from the team;
• Make adjustments when necessary.

Why choose SalesVista to automate your commission calculation

SalesVista stands out with the most complete solution to automate commission calculation, offering:  

Unmatched precision 

• Total automation of calculations;
• Automatic reconciliation system;
• Real-time validation;
• Elimination of human errors.

Maximum flexibility

• Support for multiple commission plans;
• Full customization of rules;
• Adaptation to any sales structure;
• Integration with over 30 CRM/ERP systems.

Total transparency 

• Customized dashboards;
• Real-time reports;
• Mobile access for the team;
• Complete transaction history.

Simplified implementation

• Quick and assisted setup;
• Complete training;
• Specialized support;
• Affordable pricing starts at $50 per beneficiary/month.

Take the next step 

Calculating commission doesn’t need to be a long and complex process. Your company can transform this task into a competitive advantage with the right tools. SalesVista offers everything you need to calculate commission in an optimized and automated way, allowing your sales team to focus on what really matters: selling more. 

Want to find out how SalesVista can revolutionize the way your company calculates and manages commissions? Schedule a free demo today and see firsthand how our platform can help your business grow!

Read more: SaaS sales compensation framework: how to build an effective plan.