iPoint is capable of tracking complex commission calculations based on several different criteria.
Setting up Commissions is a two-pronged process
- Set up commission schedules (completed here in Module Settings)
- Assign commission tiers to sales staff (completed in Settings > Users > Commission)
Separate Tracking for Change Order Commissions by Default
If you have a different commission schedule for change orders, you can automatically have iPoint track commissions separately on the original sale and any change orders generated. This box allows you to track those commissions separately by default.
Disable commissions for:
By default, iPoint will calculate commissions on all three staff members listed on a Sales Order (Sales Staff, Project Manager, and Technical Designer) and the two salespersons listed on an invoice.
With these options, you can choose to ignore commission calculations on:
- Sales Orders – for the Sales Person 1/Designer, Sales Person 2/Technical Designer, or Sales Person 3/Project Manager, as defined on the Sales Order Info tab.
- Invoices -, for Sales Person 1 or Sales Person 2
The list displays any commission schedules you have created.
Each line indicates
- Commission Schedule Name
- The Type of commission
- This box is checked if labor is calculated at a different rate from parts/materials.
- The pencil icon opens the modification window to make adjustments to the schedule.
- The trash can icon will delete the selected commission schedule.
The plus icon will open a new, blank commission schedule.
When a schedule is marked as a default, it will be listed in blue text on the list of commissions.
Note: When a commission rate is assigned to a user, any document opened in iPoint will calculate the current commission based on the rate set up here and assigned in the User record. The only exception is that we do not automatically generate new commissions for archived sales orders or invoices.
Adding / Editing Commission Schedule
- Name: Each Schedule should have a name that is easily recognizable by the team and descriptive enough to give an idea of what type of Schedule it is.
- This is the Default for… Commission schedules can be applied to individuals on their user record in Settings > Users > Commission. If a person does not have a default set, you can apply a commission based on their role for a particular document. Choose an option to set this commission schedule as the default for:
General – this becomes the basic schedule for anyone in the system.
Sales Rep – this will be the schedule for the Sales Staff on a sales order.
Project Mgr – this schedule is applied to a user listed as the Project Manager on a sales order.
Tech Designer – if the user is listed as the Technical Designer on a sales order, this commission will be used.
SP1 – on an invoice, the person listed in the first sales position will use this commission.
SP2 – this is applied to the person in the second sales position on an invoice.
- Each Schedule will be one of 3 types: a flat percentage of the gross sale, a flat percentage of the profit, or a customized tiered rate. Each of these rates is described in detail below.
- The last thing to note on the Edit Schedule popover is “Separate Parts & Labor.” Checking this will cause additional options to appear for the Labor calculations. For example, you can specify type and percentage options different from the Parts options already chosen. When this is not checked, Parts & Labor are added together to get the amounts to work with, and the margin is averaged (when the margin is needed for the calculation, as in the case of Margin – Tiered Pct types).
With so many places to set commission, it can be confusing to determine which rate will be applied to a sales order or invoice. But there is a hierarchy of how iPoint calculates commission.
- When a sales order or invoice is created, the commission scheduled marked as General default is applied.
- However, if a user has a commission rate defined in Settings > Users > Commission, that rate overrides the scheduled defined in #1.
- But, when a commission schedule is set as the default for a specific role (i.e., This is the Default for Sales Order – Sales Rep), that rate overrides #1 and #2.
- Note there are five default settings available:
- Sales Order Sales Rep
- Sales Order: PM (project manager)
- Sales Order: Tech Designer
- Invoice: Sales Rep 1
- Invoice: Sales Rep 2
- Note there are five default settings available:
- Finally, if the commission rate is adjusted on an individual sales order or invoice, that rate overrides all previous options (#1, #2, & #3).
We often get asked, “Why is the commission order important?” So let’s talk it through.
You have created two Default Commission Schedules:
- Default General – 10%: this is the standard commission paid on sales
- Tech Designer – 2%: this is a referral commission paid when a customer buys off a referral
Sales Susie was hired and was promised an 11% commission on her sales.
When a new sales order is created with Susie as the salesperson, iPoint will reference the Default General Schedule of 10%.
Oh, but wait a minute, Susie has a User Commission Schedule of 11%, so that user schedule beats the default – iPoint will calculate the 11%.
So far, so good.
However, Susie also referred a customer to Dapper Dan, one of her co-salespeople, and wants to be paid the referral commission.
When you define Susie as the Tech Designer on the sales order, iPoint will use the Default Tech Designer commission and pay her 2% of the deal, ignoring the 11% User Commission.
Note: If you set Susie as the Project Manager (PM) on the job, she would get the 11% commission defined on her User Schedule since there is no Default PM Schedule defined.
Flat Percent Commission Explanations
Gross – Flat Pct will use the sale price as the basis for calculation and will multiply that by the “Percentage” entered below. For example, the commission on a $100 sale, with 10% entered, would be $10 (100 × .1).
Profit – Flat Pct will use the profit (price – cost) as the basis for calculation and will multiply that by the “Percentage.” For example, the commission on a $100 sale with a $60 cost, if 10% were entered here, would be $4 ((100-60) × .1).
Tiered Commission Explanations
Tiered commissions are complicated. Math is hard! So we’ve tried to explain the commissions in three different ways. Hopefully, one of these descriptions will help you understand how iPoint calculates tiered commissions.
The whole point of our tiered commission structure is to incentivize sales staff to sell as much as possible at the highest margins. Other tiered systems incentivize hitting markers so that the sales rep earns the next highest commission percent by selling an extra $5 worth of goods.
Let’s look at an example and compare iPoint’s tiers with other commission tiers. For this example, let’s say there is a $100 sale at $50 cost for a 50% Margin.
So, if our tiers were listed as follows
Tier 1: 0 – 20% = 10%
Tier 2: 20 – 50% = 15%
Tier 3: 50 – 75% = 20%
Tier 4: 75 – 100% = 30%
iPoint Tier 1 pretends that our total margin for the sale is 20%. So at a 20% margin with a cost of $50, the total sale would be $62.50, and the profit would be $12.50. So you get a commission of $1.25 (10% X $12.50) for Tier 1.
Tier 2 goes up to 50%, which is the total margin of the sale, so it’s the last tier we calculate. The profit at that tier is $50, but we subtract the $12.50 in profit we already paid in Tier 1, so our profit for Tier 2 is $37.50. So you get a commission of $5.63 (15% X $37.50).
- Using iPoint commissions, the sales rep would make $6.88 on this sale.
- Using other commissions where the sales rep meets the tier and gets that percentage of the profit, the sales rep would make $7.50 (15% X $50).
More importantly, if the Sales Rep added $2 to the retail price to get the margin up to 51%, it would have the following effect:
- In iPoint, we would calculate the commission on the extra $2 of profit at 20%, making a Tier 3 commission of $0.40. Thus, the total commission would be $7.28.
- Other commissions would multiply the 20% by the whole profit ($52), so your whole commission would be $10.40. This means the sales rep got an additional $2.90 in commission for increasing the profit on the sale by $2. This problem obviously gets worse as you dealt with bigger and bigger numbers
The calculation of tiered commissions is based on the margin of the entire sale split into various tiers as stipulated in settings.
The first tier calculates commission based on the first X% of margin a the commission rate listed.
The second tier’s calculations are based on the second X% of margin at the specified rate.
This repeats until the margin of the invoices matches the commission margin of a specific tier.
So, if our tiers were listed as follows
Tier 1: 0 – 20% = 1%
Tier 2: 20 – 50% = 5%
Tier 3: 50 – 75% = 9%
Tier 4: 75 – 100% = 10%
An invoice with a margin of 49% would only use the first two commission tiers.
The first 20% of the commission calculations would be 1% of the first margin.
The second 30% would be calculated at 5% of the balance of the sale minus the first tier.
But if an invoice has a margin of 65%, it would calculate the tiers one – three.
Sometimes, people prefer to see actual math at work. So here is how things work from a formula basis. (For this illustration, the colors used match the colors displayed on the iPoint commission statement for a specific sale.)
For this illustration our tiers are as follows:
Tier 1: 0 – 10% = 5%
Tier 2: 10 – 20% = 8%
Tier 3: 20 – 80% = 27%
Tier 4: 80 – 100% = 35%
This will take the margin ((price-cost)/price) to choose the top percentage to use and will factor in the percentages below that in a tiered fashion, then add the results together, much like income taxes. So, for example, in that $100 sale with a $60 cost (40% margin), with the tiers as entered above:
Tier 1: ( 60 [cost] / .9 [1 – Tier 1 max margin] ) = 66.67 [sale price at Tier 1]. 66.67 – 60 = 6.67 [profit at Tier 1] × 5% [Tier 1 commission rate] = .33 [commission for Tier 1]
Tier 2: ( 60 [cost] / .8 [1 – Tier 2 max margin] ) = 75 [sale price at Tier 2]. 75 – 66.67 [from Tier 1] = 8.33 [profit at Tier 2] × 8% [Tier 2 commission rate] = .67 [commission for Tier 2] + .33 [from Tier 1] = 1.00 [summed commission so far]
Tier 3: ( 60 [cost] / .2 [1 – Tier 3 max margin] ) = 300. Since this resulted in something higher than the real sale price, we adjust it down to the real price, so here we’ll use 100. 100-75 [from Tier 2] = 25 [profit at Tier 3] × 27% [Tier 3 commission rate] = 6.75 [commission for Tier 3] + 1 [from Tiers 1 & 2] = 7.75
We don’t need to go into Tier 4 because the sale’s margin (40%) is lower than Tier 4’s threshold of 80%. So the final commission, in this case, would be $7.75.
Show Legacy Commission Reports: Commission reports changed dramatically when the new commission model was introduced. As a result, we hid the old legacy commission reports. If you have data in those reports and want to access them, click this box to re-display the old commission reports in the Reports module.
Many times multiple salespeople will be involved in a given sale. So can iPoint help me calculate split commissions? You betcha! And here’s how.
For our illustration, let’s assume that we pay a 7% commission on a sales order. But when two salespeople are involved, we don’t want to pay them both 7%!
- First, you’ve already created your standard 7% commission.
- Now, you’ll need to make a new rate for the split. In this case, 3.5% commission. All the details will mirror your original 7% commission. But the percentage will be 3.5%
- When a sales order is going to have split commissions, add the salesperson’s name and click the commission icon. Change the default 7% to the new 3.5%
- Now, add the second salesperson as either the Project Manager or Technical Designer (because you’ll remember that they can be assigned commission, too).
- Set their commission to the 3.5%
- You now have two individuals receiving a 3.5% commission on the sales order. There’s your split!
iPoint can calculate three commissions on a sales order.; one for the Sales Rep, one for the Project Manager, and one for the Technical Designer. If you are doing a 3-way split, you’ll need to create a 2.333% commission rate. (7% divided by 3 = 2.333%). Then assign the 1/3 split commission to each person on the sales order.
If you are making an invoice sale, iPoint can only calculate two commissions: Sales Rep 1 and Sales Rep 2. So, only two-way splits are allowed on an invoice.