How to create a commission scheme?

Why do you need a Commission Scheme

A commission scheme is a framework or a system that outlines how individuals or sales teams are compensated based on their sales performance or other measurable criteria. It is commonly used in various industries, especially in sales, where employees or independent contractors receive a portion of their income as a commission for achieving specific goals or targets. The primary function of a commission scheme is to motivate and reward individuals or teams for their efforts in generating revenue or achieving certain objectives.

To get more details, please refer to the steps below

How to create a Commission Scheme with Biztory

1. Click Sales and go to Commission

2. Click on Add New

3. Enter scheme name

4. Choose a Basis Type 

(You may refer the explanation of each Basis Type below the image)

4.1 Explanations of each Basis Type:

1. Revenue basis commission : A performance-based compensation plan for salespeople or commission earners and the salespeople technically earn commissions based on the total revenue they generate through sales.
   
   
2. Collection basis commission : When salespeople earn commissions only when payment is received from the customer for the sales they make and this technically means the commission payout might be delayed compared to a revenue basis structure, as it relies on actual collections. (Can choose exclude tax)
   For the Tax calculation will be The first payment will direct deduct the full tax amount only will calculate the commission. 
   Example : Invoice total amount is RM106, RM 6 is Tax amount, so the 
   First payment paid RM 50, so the calculation will be - RM50-RM6= RM44 *10% = RM 4.4
   Second payment paid RM 56 commission will be - RM 56*10% = RM 5.6
   
   
3. Profit basis commission : Salespeople that earn commissions based on the net profit earned by the company on the sales they make and this profit considers factors like the sales price, product cost, or any other associated expenses.
   
   
4. Markup basis commission : Salespeople earn commissions based on the markup percentage, which is the difference between the cost price of an item and its selling price, so usually the higher the markup percentage they achieve on a sale, the greater their commission.
   
   
5. Redemption basis commission : Salespeople earn commissions based on the total redemption value of gift cards, vouchers, or loyalty points that they sell and this means that they are compensated only when the customer actually uses the purchased item, not just at the point of sale.
   
   
6. Quantity item sold basis commission : Salespeople that earn a predetermined commission amount for each unit of a specific product or service that they sell and typically the commission amount is fixed (for e.g; $5 per item sold)
   
   
7. Amount item sold basis commission : Salespeople that earn a predetermined commission amount for each unit off a specific product or service they sell, and it is most likely combines the two common basis which is quantity item sold basis and revenue basis.
   
   
8.  Refund basis commission : When a customer returns an item and receives a refund, the salesperson who made the initial sale might have their commission clawed back partially or entirely and this means the commission they earned on the sale is deducted from their future earnings. 
   
   
9. Quantity Item Delivered: This basis calculates commission based on the number of items that have been delivered to customers. Delivery staff earn commission based on how many items they successfully deliver. 
   
   
10. Quantity Item Received: This basis calculates commission based on the number of items that have been received. Factory staff earn commission based on the quantity of products received from suppliers. 
    
    

5. Each Basis Type will have different optional fields. You can select or leave them blank to apply to all.

6. Select a Tier Type

(You may refer the explanation of each Basis Type below the image)

6.1 Explanations of each Tier Type:

1. Marginal : Commission increases in steps as you reach certain thresholds of sales or performance. For example, you might earn 5% on the first 100 units sold, and 7% on any additional units beyond that.
   
   
2. Flat Rate : You earn a consistent commission rate regardless of the quantity or performance. For instance, you might earn RM2 for every product sold, regardless of how many.
   
   
3. By Product : Commission varies based on the specific product sold. Different products may have different commission rates, allowing for flexibility based on product profitability or strategic importance.
   
   

7. Select a Commission Rate Unit

8. Fill in the Commission Table. You can click the 'Add Commission' button to add different commission tiers.

(You may refer the explanation of each Basis Type below the image) 

The key concept here is that the commission rate or amount can vary based on the sales achieved within specific sales range. This allows for a flexible and tiered commission structure, where different rates or amounts are applied as sales performance moves through different brackets or thresholds.

From: This field represents the starting point or lower bound of a sales range. It defines the minimum sales amount or threshold that must be met for a particular commission rate or amount to be applied.

To: The "to" field represents the ending point or upper bound of the sales range. It sets the maximum sales amount for which the specified commission rate or amount is valid.

Rate / Amount: This field indicated the commission rate or fixed commission amount that an individual or sales team will earn for sales falling within the defined range. The rate can be a percentage of the sales amount or a fixed monetary value.

eg; 

let's say you have the following entries in your commission table 

From : $0

To: $1,000

Rate: 5%

This means for the sales ranging from $0 to $1,000, the commission rate is 5%. So if someone makes a sale of $800, they would earn a commission of $$800 * 5% = $0

9. Click Preview to view the preview of this commission scheme.

10. Once done, click Save and you have created your Commission Scheme