How do you record sales credit?

What is sales crediting? 

In sales commissions, crediting sales activities to specific sales reps ensures that they get compensated for their performance. Crediting ensures that sales are attributed to the team members who worked on them. Sales crediting is essential in sales organizations where multiple individuals or teams are involved in the sales process, such as account executives, sales representatives, or even external consultants or channel partners. Crediting can be used to assess sales rep performance and to calculate sales commissions. This makes crediting an important part of sales management. Due to the complexity involved, it can often be a laborious and time-consuming process, even for fairly straightforward commission structures. Calculations are often fairly complex and can require periodic adjustments and auditing. This is due to the number of variables and rules inherently involved, even for simple plans. Crediting is often tracked or managed through spreadsheets, dedicated commissions software, or a combination of different tools.

Why is sales crediting important? 

The purpose of sales crediting is to motivate and reward salespeople based on their efforts and achievements while ensuring fairness and transparency within the sales compensation structure. It encourages collaboration, healthy competition, and a focus on driving results for the organization. Crediting is an essential part of fair and transparent commission-based compensation. The generally accepted rule of thumb is that everyone who is involved in a sale should get some credit, in order to stay motivated. However, crediting should account for how different team members are involved - more on that below.

What are ways you can assign credit? 

The ways in which credit is assigned should be aligned with your larger business objectives as well as your specific sales goals. Some starting points to think about include:

1. First Touch: The salesperson or team that initiates the first contact with a prospect is credited with the sale, regardless of other interactions or assistance from colleagues.

2. Last Touch: The salesperson or team responsible for the final touchpoint or closing the deal receives the credit and commission.

3. Equal Distribution: The commission is divided equally among all salespeople or teams involved in the sales process, regardless of their level of contribution.

4. Weighted Distribution: Each salesperson or team receives a portion of the commission based on their level of involvement or contribution to the sale. This could be determined by factors like the amount of time spent, revenue generated, or specific roles played.

5. Custom Rules: Organizations can establish custom rules based on their unique sales processes, assigning credit based on specific criteria or a combination of methods. This may involve considering factors like lead generation, deal size, product expertise, or customer relationship management.

Most mature sales organizations have some form of weighted distribution with customizations that incorporate the nuances of their business.

What impacts sales crediting?

Sales crediting should account for all of the rules of your commission structure, and accordingly, should be customized to your particular business context and objectives. Some of the most common variables that are involved can include: 

  • Dates: when was the sale finalized and which commission period did the sale fall into? 
  • Job function: what team is the person involved on, and how did they impact the sale? For example, was this a salesperson, a sales engineer, an implementation manager, an account manager, or something else? 
  • Involvement: was this person directly or peripherally involved in the sale, and how much influence did they have on it? Did they spend a few minutes, a few days, or a few months on this sale? 
  • Territory: where is the sale taking place, where is the customer based, and what internal teams are involved? 
  • Seniority level: Is this person an individual sales rep or a sales manager? How should credit be assigned to account for this? 
  • Product line: How profitable was the product sold, and how do margins and commission rates compare to other products? 
  • Customer segment: Was this a high priority customer segment, and what internal teams were involved? 
  • Revenue type: Is this one-time revenue, recurring revenue, a renewal, or something else? Will the salesperson be credited once, or multiple times as customer invoices are paid? 
  • Returns or cancellations: What happens to the credit if the customer returns or cancels? Does the salesperson receive credit if the reason for the return is out of their control? Is there a particular period the customer has to return or cancel within for this to affect crediting? 

How should you handle split commissions in sales crediting?

Today it’s common for multiple people across teams to work together in order to close a deal. The sales process might involve SDRs, AEs, sales engineers, account managers, implementation specialists, product experts, and salespersons from different territories or departments. Additionally, organizations may have team-based commissions, or hierarchies where particular customer segments or territories also have a larger team they fall into which can receive credit towards a larger goal. It’s important to avoid over-crediting in these situations. Document your sales process over time to understand how each team contributes to a new deal, and include documentation for exceptions or edge cases in order to properly assign credit. Ultimately, full credit should be split fairly and based on the role and time spent on the deal. The organization should avoid over crediting. In some situations, dozens of employees can receive credit for a deal, including team members who may have been important, but only spent a few minutes on the deal, while others may have invested weeks or months. Understanding these differences and designing a crediting system which reflects the true scope of work will help you reward your team fairly and keep everyone motivated. 

Sales Crediting Process Best Practices: 

As you build out your sales crediting process, follow these best practices. 

Well-defined rules. The rules for sales crediting should be clear and leave no room for interpretation. There should be a set of standard rules for all circumstances, and new rules created when the situation requires it. Standard rules ensure that crediting is done consistently. 

Clear documentation. Sales crediting rules should be made available to all impacted teams, including sales and finance. Providing the rules improves transparency and increases the likelihood of errors being caught. It also builds a culture of trust, as it removes the “black box” phenomenon of closed-door crediting. 

Visibility on crediting. Providing sales teams with clear visibility on how they are credited and the current credits they have accrued shows them where they stand and what they need to do to achieve their full earnings potential. This can have a significant motivational impact. 

Adjustments. Sales crediting will need adjustments at some point or another, in most contexts. The most common reason for adjustments is returns and cancellations. In this case, the adjustment procedure would be aligned with the company’s commission rules on clawbacks. For example, the commission rules may dictate that if a customer returns or cancels in the first 60 days, the sales rep receives no commission. In these situations, sales crediting will reflect the change. 

Audits. It’s important to audit sales crediting periodically, especially if sales crediting is done manually. Schedule time at least every commission period to review credits and ensure there are no errors, adjustments that haven’t been accounted for, last minute deals, role changes, or other issues that can impact crediting. 

Automated systems. With the complexity of sales crediting, an automated commissions process can help reduce the likelihood of errors and ease the administrative burden of assigning credits. You can input all of your rules into the automated software or tool, and have it automatically assign credits, make adjustments, and provide reporting and dashboards. 

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