NetSuite’s Incentive Management
In this webinar, we’ll be going over the commission’s module, also known as incentive compensation. In the webinar, we cover the benefits of NetSuite commissions, go over commissions 101 to review some terms and concepts, then do our demo, and end with a recap.
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What Are the Benefits of the Commission’s Module and NetSuite
- Existing transactions used to calculate commissions
- No need to export and manipulate data
- Out-of-the-box reporting provides a “staged” view of commissions eligibility, authorization, and payment.
- Scales with multiple subsidiaries in OneWorld
- Functions seamlessly with NetSuite payroll
- Leverages team selling with contributions per team member
- Captures varying revenue-based compensation models
- Ability to have separate quotas and rates per employee for a variety of criteria (subsidiary, class, department, location, item, commissionable item search)
Common Commission Structures
- Straight Salary
- Salary + Bonus
- Salary + Commission
- Straight Commission
- Variable Commission
- Draw Against Commission
- Residual Commission
Today, we’re going to focus on variable commission.
Suitable Compensation Models
- Measured from transactions
- Sales amounts
- Transactions trigger commissions payments
- Management-By-Objective (MBO)
- “Organizational planning”
- Performance measured in some other way
Triggering Transactions in NetSuite
Business Terms to NetSuite Architecture
- Rates, amounts, thresholds
- Sales criteria
- Custom criteria
Where to Put in NetSuite:
- Quota record
- Commission plan
- Commission schedule
- Commissionable item search
- Commission schedule
- Quota: used in conjunction with commission schedule
- Commission Plan: matching schedules to employees for certain date ranges, viewing commissions calculations
- Commission Schedule: criteria for line item eligibility, rates, thresholds, bonuses
- Commissionable Item Search: allows for additional line item criteria to exclude/include lines
- Commission Schedule: criteria for line item eligibility, rates, thresholds, bonuses
Transaction to Eligible Commissions
Variable Commission Plan Demo
- We’ll be looking at a services sales team
- Commissions are eligible after customer payment for implementation services
- Team members will have a 5% rate up to 100% quota attainment and 10% after. Their bonus will be 10,000$ at 100% of quota attainment
- Team manager will have a 1% rate up to 100% of team quota attainment and 2% after. No bonus will be given out.
We're going to be using an account configured for the Dilley Services company with OneWorld enabled. We’re going to be navigating with the controller role. If you're using the administrator role or another customer role, these menu paths will differ.
We begin our demo by reviewing the subsidiary structure with the navigator in the bottom center of our page. At the top, we have our headquarters as the roots subsidiary. Then we have four consolidated subsidiaries beneath it: the Americas, Australia, New Zealand, Asia, and EMEA. We also have a non-consolidated shared services subsidiary. Beneath these consolidated subsidiaries, we have our child subsidiaries. This is where our transactions will reside with our customers. We bring this up because we can set quotas or schedules at all three levels: we can have a quota at the consolidated headquarters level or at each of the Americas, Australia, New Zealand, Asia, and EMEA levels, or one level down again, we give out a quota for each independent child subsidiary if we did choose to. Even more than that, we could break it up by department within each subsidiary. The schedules have the same ability, so we could have schedules based on each level of the subsidiary. That means we could have separate rates or bonuses based on sales within those subsidiaries.
In terms of reports, we have our commissions overview report, which we’ll review in the webinar. This will give us a stage view of commissions from the transaction, the eligibility of commissions, if commissions have been authorized, and if commissions have been paid.
Based on the requirements we discussed, we will need two types of plans: a services sales manager plan and a services sales team plan.
We first review the sales team. As discussed, the commission’s plan is where we match our schedules to our employees, and it’s also where we see our calculations.
The sales reps on this plan are Alex Ricardo and John Norman. Here, we have the currencies for the subsidiaries they’re related to, meaning that Alex would get paid out in Danish Crohn's and John will get paid out in Canadian dollars. The day eligibility is for the commission’s engine to read which transactions should be eligible for commissions before even applying the schedules. Any transactions between July 1st and December 31st will be considered for both of these employees. Because we're using quotas for these commissions schedules, we'll only have period calculations and no transaction calculations in this case.
You can expect to see beneath period calculations a grouping of employee names with the schedules, as well as the periods, items, and then all of your calculations grouped into those schedules. For instance, the basis of the transaction amounts, the calculations based on the rates that were applied, the previously authorized commissions, the currently eligible amounts, and finally, the amounts that have been paid to the employee. We get an even better visualization of this with our commission’s overview report.
Moving onto the implementation services Americas schedule. This is a relatively simple schedule. We're capturing transactions within the Americas, which is a consolidated subsidiary. USD is the base currency for the Americas consolidated subsidiary. We're basing the schedule on a quota, which is per year, it's categorized by item, and the commissions are eligible on collections or customer payment. We could have listed many items here with many different rates, but to keep it simple, we have one item and we have the rates. We discussed 5% below quota achievement and 10% above quota achievement.
We also look at the bonus schedule. We notice the key differences here are that we're capturing all transactions beneath the headquarter subsidiary, which means we're going to be consolidating all transaction amounts up to the subsidiary, using the consolidated exchange rates. If we've achieved our quota, we'll be paying out $10,000 to the employee. Notice here that we're using marginal, but instead of percentage, we're using an amount.
Now let's head over to our manager plan and see what the differences are. On the manager plan, we have one schedule for the sales manager. As discussed, it will have a 1% and 2% rate. The sales reps will be Clara Seguin for the same date range as John and Alex.
Looking at the schedule, some of the major differences between the other schedules and this one will be that here we have the manager schedule checked off. This means that for all of the implementation services sold by the manager and their subordinates or those they supervise will have commissions calculated with rates of 1% and 2%, as discussed earlier.
To review our quotas, we’re going to navigate to set up > other setup > established quotas and then look at the list. Of interest are only the first four here. We have two quotas for John, one quota for Clara, and one quota for Alex. Clara’s quota is a team quota. This is going to be what we measure against for all sales done by John Alex and Clara. Obviously, Clara’s rates were a little bit lower. John has two quotas. He has a quota for the consolidated level of the Americas and the consolidated level of EMEA. This is possible because we can set quotas per each consolidated subsidiary and we could even get down into the department, class, and location levels and have separate quotas for various combinations. In this case, though, we're simply measuring sales of implementation services for all three of these employees, and John has two quotas. Alex and Clara are on the highest subsidiary level of consolidation with headquarters.
For Clara, beneath headquarters, for the year 2017, we're going to have a $12 million quota, which is going to be a team quota, meaning that any services sold by Clara’s subordinates or those she supervises, as well as herself, will be measured against this quota. The manager's schedule will determine which rate she's receiving in terms of commissions. We've distributed this quota for every period here, but because we're using the annual period, all of her sales will be measured against the $12 million mark, instead of being broken into periods, like we would be able to do with other commission schedules.
We then move on to our report. Here we see that we’re looking at the current month of commissions with the context set to headquarters. In OneWorld, in financial reporting, you'll normally use the subsidiary context to see things consulted on a certain level, but it's a bit different with commissions. With commissions, we're using the subsidiary context to filter on the schedules that we set up earlier. We had two types of schedules set up that were on the headquarters level: we had Clara’s manager schedule, and we had the bonus schedule for John and Alex. It’s important to note that this is an out-of-the-box standard commission report and that we could customize this to look a lot different if we wanted to. Remember that the eligibility of commissions was based on customer payment, which means that this invoice has been paid in full so that the calculated amount is equal to the eligible amount. This has not yet been authorized, and it's not yet been paid out. However, John does have one commission authorized so far and paid out.
We then take a look at how we can switch contexts and see different calculations.
Diving into one of the transactions we see if we can update this report in real-time by accepting a customer payment. Below, we have our invoice for Abbott's technologies, based in the United Kingdom. Implementation services have been sold (800 hours), and Alex is the sales rep. If you're using team selling and you wanted to split commissions, you could have a sales team sub-tab with a contribution percentage, but we do not have that in the case of this demo.
We accept the payment and go back to our report and see what's been updated. We want to make sure that we’ve applied the amount to the invoice. Once saved, we go back to our report, and we see that it’s been updated. We have the 10,400 pounds in the eligible total amount because this invoice has now been paid, and we've met the eligibility requirements.
The next step is to authorize this, pay it out, and show you how to get it through the entire flow. To do this, we go to Payroll and HR > Commissions > Authorized Employee Commissions. At the top of the list, we see Alex Ricardo. We’re going to check the box next to his name and then bypass accounting approval so we can go straight through to paying afterward. Then, we’re going to authorize, refresh one time, and it should be complete.
Going back to the report, we now have an authorized total, and we can pay it out.
NetSuite Incentive Management - Webinar Recap
NetSuite Commissions Benefits
- Real-time visibility of commissions calculations
- No need for data extraction and manipulation
- OneWorld and Payroll integration
- Accommodates team selling and spitting commissions
- Low effort to payout and report on employee commissions
- Report on “state” of commissions, from eligible to payout
The webinar also included a demo of the NetSuite commission module.
If you have any questions regarding the webinar or would like support with your future/current NetSuite implementation, GURUS Solutions is here to help. Our team of NetSuite experts are ready to take on your project and work with you to help meet your business goals.