When to payout commissions earned to a sales rep?

Question

Let's say a sales rep earned some commissions on a sale in January. Is it fair to payout the commission earned by feb 15th or is that too long of a time after january? What if the customer is on terms and won't be paying their bill until 60 days later. Is it fair to wait for the customer to pay the invoice before paying out commisions to the sales rep?

Answer 1

I think-if a person is working on commission, they should be paid when the customer pays. Why should you pay out a commission when the customer has not paid, and we all know, all customers do not pay and you get stuck. If a rep sells a product on commision, he should get paid when the sale is completed and paid in full. You should set a date each month or twice a month that you pay the rep for all sales that are paid in full. It is tuff when a customer doesn't pay, but that is the reality of business for all of us, the sales rep should have to take the blow for that also.

Answer 2

If a company is on terms you should pay the rep half of the commission during the next pay period and pay the rest after the company pays.

If the company returns or cancels the order just make sure you let the sales rep know that there is a possibility of a charge back.

15 days after the sale is more than fair, most companies I have worked for the earliest I got commission is 30 days after.

Answer 3

From what I've seen over the years, a salesperson never receives commission from January sales until the following month. February 15 seems more than fair. After all, it does take some time to calculate those numbers. Then, if the customer returns the order in February, that effectively would reduce the total commissioned sales for February (that would be paid March 15).

I don't think it would be fair to force the salesperson to wait for payment. After all, it's not her fault (presumably) that the customer isn't paying. However, if the salesperson seems to be coming up with a bunch of sales to deadbeats, I would start suspecting that she wasn't acting in the best interests of your company.

Hope that helps!

Answer 4

Feb 15th is a reasonable time to pay the commissions, especially if the customer has not paid their bill yet. In some sense, the company is paying the money before it is actually earned.

The way to deal with this is to consider the early payment a draw against commissions and consider the commission actually earned at the time the customer pays his bill. In the event the customer nevers pays the bill the salesman owes the commissions already paid, back to the company. These can be recouped in subsequent paychecks from commissions earned.

This also provides incentive for the salesman, who has the relationship with the customer, to assist in the collection of payments to the company.

Answer 5

I am a rep, and 100% of the companies I work with will not pay until they get paid, some wait 30 days after they get paid which is quite aggravating to me. I suggest setting it up where you get paid that the rep gets paid 7 days after you get the check, most reps will agree to this.

Answer 6

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Answer 7

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Answer 8

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