The Hidden Costs of Spreadsheet-Based Sales Compensation

Recent surveys suggest that 80% - 90% of North American companies use spreadsheet based systems to manage sales compensation. An October 2007 survey revealed that while 80% of the executives view sales compensation management as a "strategic" function, fewer than 25% claim their spreadsheet based system provided measurable sales performance value.

So why continue using spreadsheets if they are not effective in driving sales performance? A majority of those surveyed indicated cost as the primary reason; most indicated they had no budgetary cost associated with licensing the spreadsheet software. But in a study by David Fritz from Growth Solutions, the direct and indirect costs associated with spreadsheet-based sales compensation management are real....and substantial.

Each participant provided cost data in regard to program administration. Data was collected on annual direct costs (fully loaded cost of those spending time in admin, systems development, etc.) and indirect costs (cost of sales force time reviewing/fixing incentive payments, etc.). These costs were compared to each participant's annualized sales revenue, incentive payout, and number of payees (sales reps + sales managers + other staff eligible for sales incentives).

On average the (annual) indirect costs related to program administration ($1,319/payee) exceeded the direct costs ($1,140/payee). In some cases, indirect costs were substantially greater than the direct; as one participant put it: "Reps spend 5% of their time in checking/fixing commission statements and managers as much as 10% - we have an issue of the sales force turning into accountants."

This study indicates that companies are spending on average approximately $2,459/payee each year; that's just over $200/rep per month!

As the leading on-demand sales compensation / sales performance management solution, Compel significantly reduces direct costs. At a maximum of $50/user per month, Compel provides efficient automation that eliminates the inaccuracies and manual processes common to spreadsheet based systems. Better yet, Compel virtually eliminates the indirect costs associated with lost selling time, dispute resolution and the like. Compel's dashboards provide sales representatives and their managers transparency into the commission process and visibility into real-time earnings and performance data to keep them aligned, motivated and focused on selling.

To learn how Compel can help you achieve your financial compliance needs in sales compensation management, follow the links below.