Sales Comp Errors Cost You More Than You Think

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We all make mistakes in business, regardless of how conscientious we might be. But compared to the errors we’re capable of making — you know, the life-altering ones — sales compensation errors rank relatively low on the list. After all, most inaccuracies discovered in the morning can be fixed by lunchtime, right?

Not necessarily.

The fact is, compensation errors can be very serious and expensive. According to the IRS, about 33% of all employers make payroll errors that result in costly penalties. Compensation errors can also result in lack of compliance with the Fair Labor Standards Act (FLSA) and — you guessed it — more fines. Add to this the cost of overpayments and the cost of turnover when unhappy reps seek more accurate employers, and the price you pay for sales comp errors is high, indeed.

If you’re managing sales compensation manually, you know that keeping track of varying comp plans is time-consuming and confusing. Because the task is so tedious, mistakes — even though infrequent — are made by payroll employees.

When you find errors, here are four steps to getting back on track:

  1. Contact the individuals/entities impacted by your mistake immediately — the IRS, the local or federal government, and/or your employees — and let them know what happened.
  2. Own up to the mistake. Don’t try to cover it up, blame someone else, or minimize the damage. Admit it, and apologize.

  3. Fix it, and fix it fast! The government starts exacting fines when you are as little as one day late, and employees get really grumpy when their paychecks don’t reflect what they’ve earned. If you don’t want costs to accrue, and if you want your best employees to stick around, make your mistake go away ASAP.
  4. Prevent future errors. Use sales compensation management software to manage payroll. This type of software completely removes the manual element from the compensation process, ensuring deductions are correct and that you’re adhering to FLSA guidelines. You also won’t have to spend hours and hours slogging through spreadsheets only to go back when errors are found and spend more time correcting inaccurate commissions.

To err is human, but mistakes that seem small can have big consequences. To learn more about improving accuracy, read Get Executive Buy-In: Incentive Compensation Management.

—Erik Charles is Xactly’s Principal Incentives Strategist.

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