Calculating commissions in the Foodservice and JanSan supplies distribution industry is hard. There are different commission rates in place for products, sales representatives, and customers.
Nonetheless, with a commission based sales team it is important to protect the company’s gross margin, and there are a number of ways distributors can make calculating their complex array of commissions much easier.
To make calculating sales and gross profit commissions easier for distributors of Foodservice and JanSan supplies, any changes that are made to pricing need to happen instantly. When commissions are being calculated, you need to be sure that the prices that were used by your Sales team were the most up to date and accurate. Equally if an error is made with pricing initially, having the ability to update it instantly. This means you won’t have to contact each Sales representative to advise them of the error, in order to avoid the product being sold at an incorrect price.
With advanced pricing software being adopted by the larger players in the industry, distributors can protect their pricing and ensure that their Sales teams are only being paid what they are owed. It also allows distributors to update their pricing when more information is made available for estimating the true cost of a product, protecting margins even when rebates and commissions are applied.
There will always be an element of negotiation with customers, you want to give your Sales representatives the power to capture business away from competitors and retain loyal customers. However, by allowing too much freedom for Sales representatives to enter in their own discounts, not knowing what the best estimate of true cost might have been, it puts margins at risk.
By bringing discounts and rebates back into one centralized system, Sales teams are still able to access the same discounts and rebates that are available. Taking away some of their freedom will not obstruct your Sales team negotiating power, rather it will place more control over what types of discounts are offered and when. It will also allow you to easily track and calculate commissions regardless of their complexity, for example when the company sets rules as to whether the Sales representative commission cost allows or disallows the vendor rebate cost for commissions.
It is common for distributors to offer a straight commission program, for example a 10% increase in gross profit dollars equals a 10% increase in commission dollars. However, for distributors of Foodservice and JanSan supplies there is a need to be able to offer these standard approaches to commissions as well as more complex commission programs. The traditional software solutions, like QuickBooks, struggle to address even the standard types of commissions and don’t have the capacity for anything complex.
To make calculating sales and gross profit based commissions easier, distributors of Foodservice and JanSan supplies need to look for a solution that has the functionality to handle the standard approach and the more complex commissions as required. Distributors should seek a solution that can manage this activity without customizations to avoid the solution becoming hard to upgrade.