This article is relevant if you seek to process commissions in NetSuite and you are contemplating your options.
Background
NetSuite offers a module to process commissions. Great, but it is important to remember the following: The conventional wisdom, among any commission processing module, is that the software is likely going to need to be refined to meet your organization’s unique requirements. Undoubtedly, management creates commission payout programs designed to incite specific salesperson behavior. Because the programs often evolve over time, it forces considerations for special exception logic, historical transaction look back, and commission structure changes; challenging for general commission software.
A common observation is to see spreadsheets used by our clients to calculate, track and report commissions maintained by internal accountants. What this approach promises is:
- Limited salesperson visibility for anticipated payout
- Extensive effort to maintain
- Long lead times to calculate, report and payout
- Calculation errors.
Another Better Way to Manage Commissions in NetSuite
By the very nature of commission management, you need to be prepared to perform some customization and refinements to the software. In fact, NetSuite’s Commission Module references a transaction line item (column) field called “ASA” which stands for Alternative Sales Amount. These fields are deliberately not populated with information during normal transaction processing. The expectation is that you will produce script to put data into these columns for the system to calculate “commissionable sales”.
If you are going to go to the effort to write some script, why not model the commission program in NetSuite to fit your specific requirements from scratch? It’s easy on the platform.
General Commission Elements
The general consideration for calculating commissions usually falls into these questions:
- Eligibility: what is a commissionable sale?
- Value: what value is used for the commissionable sale? Is it based on gross or net revenue? What about gross profit?
- Payout Trigger: when is the payout due? Is it immediately when the sale is made? At the end of an accounting period? When the payment has been received?
- Payout Refinements: What happens during partial payments or returns that produce credits?
Example Client Work Solved Commission Challenges
We recently worked with a client that appreciated our capacity to model business problems and turn those into solutions on the NetSuite platform. We produced some interesting features solving their commission challenge:
NetSuite Gross Profit Calculations
The client needed invoice line level gross profit for their dominant drop shipment business. Hence, they don’t really maintain inventory. NetSuite gets close with line level “Gross Profit Estimates”, but it doesn’t go all the way. Nightly, we would evaluate new sales invoices and connect them back to related sales orders, connect those back to purchase orders, and ultimately connect that back to item receipts and vendor bills. With good cost information in hand, we could then calculate gross profit and carry that on each invoice to produce “commissionable gross profit”.
Sales Person Compensation Model
We extended the employee table to include a commission rate matrix. This allowed us to accommodate commissions that meet specific target thresholds and corresponding rate structures. That could then be connected to “commissionable gross profit” allowing for commission expense and obligation to build in near real-time.
Commission Period
The client wished to pay commissions at a monthly interval. Yet, the timing wasn’t always exactly at the end of the month. No problem. We created a control table to represent the current and future commission periods that could then be linked back to each invoice (or credit memo) transaction. We now can track what period the transaction sits.
Commissions Paid On Receipt Function
An interesting feature is the capacity to track invoice transactions that become fully paid and then stamp them as commission ready. We then link those transactions into the commission period structure. From there, we have all we need to summarize and payout commissions.
Dashboard Reports
With information now at hand, we produced dashboards for the sales team so each member could see their commissions earned. All parties were pleased. That makes us smile.
Summary
If you are thinking about managing commissions in your NetSuite system, expect to model your program to get what you need. Indeed, that is why spreadsheets are so handy. But that comes with a cost of ongoing maintenance and labor efforts. Remember, if you can model it on a spreadsheet, in the right hands of an expert actor, it can be managed in NetSuite because the platform is designed to be extended.
If you are looking to improve your commission management in NetSuite, or work on other business information management challenges that deserve innovation, contact us.
I am looking into options on how to publish commission reports on the sales reps dashboards, but these reports do not have the snapshot capability. How did you publish yours?
Hello Andrea,
Our approach is to use Saved Search.
I have looked into doing it as a saved search but cannot seem to get it to where the actual commission amounts come out correctly. Do you start it out as a commissionable items search?
Our approach does not use NetSuite’s Commission module.
Are you trying to get the amounts that you have paid or the amounts earned?
You should be able to get the data in a transaction search. Use Type = “Commission” on the ones paid.
Marty
Ok we are wanting to have it to where sales can see it through out the month on where they are at prior to it getting paid out. I will try it your way and see if I can make it work. Thank you!
As an alternative to utilizing the employee portals to give reps web access to dashboards and reports, what method would you recommend using to produce and distribute individual sales rep reports? Ideally, we are looking for an excel or pdf commission report that can be published and exported individually or in masse for all reps. Thank you.
Hi Matt,
We are a fan of using Saved Searches as a way to distribute information as you can have one search use the sales persons name as a way to filter records. Yet, the information layout is basic. Yet, some love how it shows up in email. The trick is to create hyperlinks on each row so users can get to specific records in NetSuite.
Of course, the other technique is to use NetSuite’s built in Report mechanisms to schedule. Yet, these can become cumbersome depending on how you want to filter and distribute. Be sure to check out our article about best practices in reporting.
Very helpful…thank you.
How can I create a save search that will return commission to be paid to sales rep.
currently im using this formula:
Field: formula (Numeric)
Summary type: Sum
Formula: {tranestgrossprofit}*.285
but I need Net Profit and not Grossprofit
Ex: If $150 was the price and $100 was the cost. Then 28.5% of $50
Max,
Please see my article on Gross Profit here: https://blog.prolecto.com/2018/05/13/learn-how-to-reliably-measure-netsuite-gross-profit-and-margin/
Then consider this article once you can reliably measure margin: https://blog.prolecto.com/2021/12/19/overcome-netsuite-commission-and-royalty-challenges/
Marty