Sales Compensation and Expense Allowances

SALES CYCLES

Next you need to decide when to pay out the incentives.

A good rule of thumb is to have accurate and timely reporting of sales and to pay sales personnel as soon as possible after the sale is made. This will motivate them to sell more. If you wait for other events (such as product delivery or payment), you may be holding the salespeople responsible for things over which they have no control.

Short Sales Cycles

Short sales cycles suit sales compensation plans best. Cycles of 1-3 months are ideal, since they lend themselves to frequent payouts, which increase motivation; however, cycles of up to 12 months are workable.

Long Sales Cycles

Longer sales cycles are sometimes necessary, but if you use them you will want to avoid:

• low base salary/high commission plans, which will put stress on the employees' budgets
• infrequent payouts, which will lower employee motivation

One way to deal with long sales cycles (that last more than 1 year) is to have tiered payouts.

You may want to pay separate and increasing lump sums for:

• qualifying the customer
• a successful demonstration
• making the sale