The persistent question of whether to build or buy a solution finds a particular echo in the field of commission management. Between Excel, internal solutions and dedicated software, the choice is never easy...
However, as the sales reps, finance and operations teams point out, the answer depends on a whole host of factors!
Sales commission, a crucial element in the management of a business, is often perceived as something unique to each organisation. Yet despite this uniqueness, common challenges persist: flexibility, constant adaptation and efficient automation. It is in this shifting context that the question of building or buying a commission management solution finds its playing field.
This article explores the ins and outs of this crucial issue, highlighting the advantages and disadvantages of each option.
1. Managing commissions with Excel: Pros and cons
Pros
Excel has a well-established place in sales commission management, often praised for its simplicity and flexibility. But why does this spreadsheet tool remain so popular, despite the emergence of more specialised software solutions?
Universal accessibility
First and foremost, the prevalence of Excel in business environments makes it an obvious choice for many companies.
With the Microsoft Office suite already in widespread use, Excel is easily accessible for most employees. Its pre-installed availability on most desktops and laptops makes it a familiar tool for managing sales commissions.
Quick to learn
One of the main attractions of Excel is that it is so easy to learn.
For companies looking for a quick solution to manage basic sales commission plans, Excel offers an immediate start without the need for extensive training or integration costs. In theory, all you have to do is open Excel and start working.
However, the reality can sometimes differ from this ideal vision. Moving away from simple remuneration schemes, commission management in Excel can quickly become complex. The need to master advanced functionality such as VBA macros, the increasing complexity of spreadsheets and the challenges associated with maintenance can make this solution less attractive in the long term.
Cons
Often considered the tool of choice for various data management and analysis tasks, Excel has a number of major drawbacks when it comes to managing commissions effectively and efficiently.
Here are some of the challenges that companies may face when choosing to use Excel :
Lack of multi-user sharing
Unlike SaaS solutions offering a multi-user approach, Excel is limited to a single user, making it difficult to share commission data effectively between several users or groups of users.
"Before, we used to use Google Sheets, which took up a lot of our time, especially as we had to go back and forth between Sales, the sales reps and finance."
Paul Barret, Sales Ops at Glady
Lack of data reliability
Excel does not have native capabilities for connecting to other systems such as CRM, ERP and payroll software. This limitation results in slow, error-prone and non-real-time processes.
According to a Quotapath and Global Surveyz survey, here is the percentage of companies whose sales reps report at least one commission dispute per year: 58% (less than half), 34% (very few), 4% (more than half), 4% (none).
"With Excel, we had to select the data from Salesforce by hand, create dashboards, check all the elements, etc."
Tomas Hons, GTM Strategy & Operations Manager at Make
Solution not designed for commission management
Unlike dedicated commission management tools, Excel does not provide specific functionality such as managing commission plans, defining quotas or creating customised reports. This forces users to develop their own solutions, which can be tedious and error-prone.
"Excel was taking up an enormous amount of our time, whether in terms of retrieving the various pieces of information (quotas, team changes, etc.) and readjusting all these elements, updating the Excel template, having it validated by the manager and then communicating it to the teams".
Aude Cadiot, Revenue Operations Lead at Spendesk
Limits in terms of scalability and complexity
Managing commissions in Excel can quickly become complex and time-consuming, particularly as compensation plans become more sophisticated. The need to create and manage complex formulas can make the process prone to human error and time-consuming.
The financial risks associated with using Excel for critical processes have been demonstrated by JPMorgan Chase, underlining the importance of more advanced solutions to avoid such errors.
Lack of real-time visibility
Excel does not provide real-time data updates, which means that commission information can quickly become out of date. Without a real-time view of sales performance and associated commissions, decision-makers can struggle to make informed decisions.
As proof of this, according to The state of sales compensation, only 32% of sales reps have real-time visibility of their commissions and know exactly how much they will earn after a deal.
"Excel involves: formulas that are sometimes broken, calculations that are sometimes a little opaque because Sales didn't necessarily understand them and above all ergonomics that aren't obvious".
Clément Bouillaud, Director of Operations at Partoo
Ultimately, this lack of real-time visibility and opacity means that sales reps have to review and recalculate their commissions themselves, wasting precious time away from their core business of selling.
"The problem was that we had the feeling that our teams were spending a lot of time managing their commissions, and as a result they were losing a bit of time on the essential part of our business, which is selling flats".
Anatole Oger, Sales Manager at Hosman
Difficulty managing large amounts of data
Although Excel can be effective for processing small amounts of data, it can quickly reach its limits when confronted with large data sets. Large spreadsheets can become difficult to manage and can lead to slow processing times and considerable errors.
"So sometimes it could take up to 2 days to get the commissions into Excel".
Martin Dambrine, Sales Ops at Indy
Lack of control over access rights
Excel lacks sophisticated mechanisms for managing access rights, which can make it difficult to protect confidential commission information. Without the ability to precisely define who can access and modify commission data, companies risk leaking sensitive information.
Data security risks
Excel spreadsheets are often stored locally on users' computers, making them vulnerable to attacks and data loss. Companies need to take additional measures to secure these files, which can be difficult to implement effectively.
Difficulty in auditing data
Without a robust change tracking system, it can be difficult for companies to trace the history of changes made to commission data in Excel. This can cause problems during internal or external audits, and can compromise compliance with current regulations.
In conclusion, although widely used, Excel presents significant limitations for commission management, particularly in terms of sharing, connectivity, specific functionalities and scalability.
For companies looking to optimise their sales compensation processes, investment in more advanced and integrated solutions is essential to avoid costly errors and improve the overall efficiency of sales operations.
2. Managing commissions with an internal solution: Pros and cons
Pros
The decision to build an internal solution to manage sales commission offers a number of strategic and practical advantages, giving companies the flexibility and control they need to respond effectively to their specific requirements.
Here are some of the key benefits of this approach:
Customisation to meet specific needs
One of the main advantages of building an in-house solution is the ability to tailor it to the company's specific needs.
Unlike some pre-fabricated solutions that may require compromise, an internal solution can be designed to meet the exact unique requirements of the organisation in terms of remuneration structures, workflows and reporting.
Controlling the development roadmap
With an in-house solution, companies have direct control over the tool's development roadmap. Rather than relying on updates provided by a third-party supplier, internal teams can prioritise and implement functionality according to the evolving needs of the business, offering greater flexibility and responsiveness.
Building an internal solution to manage sales commissions offers companies a customised and controlled approach that can effectively meet their unique needs.
By capitalising on existing software, customising functionality and controlling the development roadmap, companies can optimise their sales compensation processes and improve their competitiveness in the marketplace.
Cons
Creating an internal solution for managing sales commissions may seem attractive at first glance, offering the possibility of customising the tool to suit the company's specific needs.
However, this approach comes with its fair share of drawbacks and significant challenges. Let's explore the main drawbacks of building an in-house solution to manage commissions, as well as the resources and tools needed to overcome these challenges.
Lack of expertise in the field
The design and development of an internal solution requires in-depth expertise in the management of sales commissions. Without this specialist knowledge, it is easy to design an unreliable product that can compromise the performance of sales teams.
Systems developed internal are often complex and coded in such a way that only a few people understand how they work, which can lead to dependency and operational inefficiency.
Generally speaking, companies obtain a functional result, but one that is limited in its capabilities and does not fully meet their needs. What's more, a lack of knowledge about sales commissions can lead to costly miscalculations for the company.
Time to create
Creating an internal solution takes time, from defining requirements through to implementation and ongoing maintenance. The design, development, testing and deployment processes can take months or even years, depending on the complexity of the solution and the resources available.
High total cost of ownership
Building an in-house solution may seem economical in the short term, but in the long term it can prove costly.
The internal and external resources required to design, develop, test, implement and maintain the solution entail significant costs.
What's more, the cost of maintaining and upgrading an internal solution increases over time, especially if frequent modifications are required to adapt to changes in commission plans or in the company itself.
Complexity and functional limitations
In-house solutions are often unable to manage the complexity of sales compensation plans, particularly in companies with large sales teams and multiple commission plans.
The design and development of an internal infrastructure to manage varied remuneration attributes, such as commission accelerator mechanisms, deferred remuneration triggers and product-specific accelerators, can be challenging and lead to functional limitations.
For example, creating a solution within its CRM may offer opportunities for customisation, but it may also be limited in its ability to handle advanced commission calculations. Customised systems may also lack the flexibility to adapt to constant changes in sales compensation plans, requiring additional resources to develop new functionality.
Risks relating to resources and maintenance
The creation and maintenance of an internal solution involves human resources risks, in particular the dependence on internal or external resources for the development and maintenance of the solution. For example, the resignation of a programmer after an internal application has gone live can leave the company without technical support and unable to deal with any problems or necessary changes.
What's more, ongoing maintenance of an internal solution requires time, resources and specialist skills to manage bugs, updates and changes in business needs.
In conclusion, while creating an internal solution for commission management may seem attractive, it has significant drawbacks in terms of cost, complexity, risk and time involved. Companies need to weigh these factors carefully and consider alternatives such as specialist software to meet their sales commission management needs.
3. Managing commissions with software: Pros and cons
Pros
When it comes to managing commissions, investing in dedicated software offers a host of advantages over using simple spreadsheets or setting up an internal solution.
Let's take a closer look at these benefits and see why commission calculation and management software could be the ideal choice for your business.
Greater visibility and transparency
Sales commission software provides greater visibility over the commission process, giving sales reps, managers and executives access to data in real time.
This transparency boosts sales reps' confidence in the remuneration system, motivating them to concentrate on their core business!
What's more, sales reps can better manage their teams based on concrete data such as quota attainment and commissions received.
"Qobra gives sales reps visibility of their future remuneration while enabling them to understand how their performance translates into financial terms. Most sales reps are motivated by the possibility of earning more money if they perform well. With Qobra, they can therefore see at any time how much their commissions are at the moment, as well as what they will be at the end of the month."
Manuelle Douroux, Sales Operations Lead at Agicap
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Considerable time savings
By automating compensation management processes, companies can significantly reduce the time and effort required to manage incentive compensation programmes.
By eliminating manual tasks such as reporting and transaction processing, sales, finance and HR teams can focus on higher value-added tasks, resulting in increased productivity.
The flexibility of the software also makes it easy to manage organisational changes, encouraging business growth and scalability.
"On the commission closing side, we've gone from 5 days to 2 with Qobra".
Vladimir Ionesco, Director of Global Sales Performance at Doctolib
In addition, tools such as Qobra offer a user-friendly experience, enabling users to navigate the system easily and access relevant compensation information quickly. This ease of use encourages wider adoption of the platform, maximising its impact on overall sales productivity.
Precision and reliability
Sales commission software ensures accurate commission calculations, reducing the risk of costly errors.
Unlike Excel spreadsheets, which are notorious for being prone to errors, software offers greater reliability, giving sales reps greater confidence in the remuneration system.
"With Qobra, there is no potential discussion around calculation errors."
Pierre-Gaël Pasquiou, Chief Sales Officer at Welcome to the Jungle
Real-time integration and customisation
Sales commission software offers real-time integration with CRMs, providing up-to-date sales reps for accurate performance monitoring.
What's more, this software allows dashboards to be customised to meet the specific needs of sales reps, managers and executive teams, promoting better decision-making and more effective management.
"The first criterion that led us to choose Qobra was connectivity with our tools. So Salesforce, our CRM, is extremely important. The second was the clarity and ease of understanding of these results for the employee. The third was the ease with which the tool could be administered. As Ops, it's really important to have a tool that's intuitive, flexible and allows us to make changes very quickly".
Aude Cadiot, Revenue Operations Lead at Spendesk
Improved business agility
Platforms like Qobra also offer a better understanding of the market and customers, thanks to data analysis. By identifying emerging trends and understanding changing customer needs, companies can adjust their sales strategies in real time, gaining a competitive advantage.
What's more, the flexibility of automated solutions enables companies to adapt quickly to changes in the market and modify compensation plans as required. This agility is essential to remain competitive in a constantly changing sales rep environment.
"Qobra makes it possible to highlight the correlation between their performance and their remuneration."
Diva Fumery, Head of Business Operations at Welcome to the Jungle
Improving sales performance
Firstly, by freeing sales reps from the tedious task of calculating their commission, specialist software allows them to concentrate on selling.
According to a study carried out by Qobra and Modjo, 61.9% of employees using commission calculation and management software exceeded their targets, compared with just 30.1% of those using Excel or Google Sheets.
What's more, by providing clear visibility of how each transaction affects their remuneration, salespeople can structure agreements that are better suited to their needs, while remaining aligned with the company's objectives.
Finally, automation facilitates data analysis, enabling companies to design optimised sales territories and identify opportunities for growth. By combining these benefits, companies can expect higher sales realisation rates and greater sales team productivity.
"Since we've had Qobra, we've seen between 15 and 20% progress on achieving our targets."
Tomas Hons, GTM Strategy & Operations Manager at Make
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Alignment of sales reps, operations and finance teams
From all the points listed above, we have seen that a sales commission tool can be used to align sales rep, operational and financial teams.
And for good reason:
- Transparency and clarity: By reducing misunderstandings and suspicions between sales rep, operational and financial teams, a tool like Qobra promotes better collaboration and alignment of objectives.
- Shared objectives: By aligning sales reps' remuneration structures with the company's strategic objectives, sales commission software helps to create an alignment of interests between the various stakeholders.
- Performance optimisation: Using accurate sales performance data, the commission tool enables companies to adjust financial incentives to encourage desired behaviour.
- Cost control: By automating the commission calculation process, companies can reduce the errors and potential fraud associated with manual pay calculations.
- Reporting and analysis: Sales commission tools generally provide advanced reporting and analysis capabilities, enabling operational and financial teams to monitor and evaluate the impact of remuneration strategies on the company's sales reps and financial results.
In summary, purchasing sales commission software offers many advantages over traditional methods such as using Excel or in-house solutions. From improved visibility and transparency to increased productivity and reduced costs, specialist software offers a complete and effective solution for managing sales commission, promoting long-term business growth and success.
Cons
When it comes to choosing software to manage sales commissions, it's crucial to carefully consider the potential drawbacks.
Here are a few things to bear in mind before committing yourself to the purchase of a software solution:
Potentially faulty customer service
One of the main disadvantages of opting for commission management software is the risk of encountering inadequate customer service. If the support is not up to scratch, you may find yourself without the assistance you need to use the software correctly.
For example, a lack of agility or customisation of the software, a lack of technical support skills, and so on. These are all potential failures that need to be anticipated to avoid compromising the satisfaction of the user teams (Sales, Finance, HR, etc.).
💡 Best practice
Before making a decision, be sure to do some thorough research, consult customer review platforms such as G2 or Capterra, or contact customers of the solution directly.
Lack of a competent internal manager to implement the software
Firstly, the failure to appoint a key individual internally to oversee this critical process can leave the project without a clear direction. In addition, the lack of specific skills or knowledge of the commissions topic on the part of the designated internal manager can seriously compromise the quality of the implementation.
The consequences can be significant. Firstly, the delay in implementing the software can cause disruption to existing commission management processes, which can affect team motivation and efficiency. In extreme cases, this can even lead to the cancellation of the software implementation project altogether, resulting in a considerable loss of resources and time. What's more, even if the project is successfully completed, the lack of involvement and support from internal sales rep, operational and financial teams can compromise the adoption of the software, limiting its potential benefits.
💡 Best practice
It is crucial to appoint one or more competent, knowledgeable managers as early as possible, with the necessary technical skills and a thorough understanding of the company's specific commission management processes. In addition, it is essential to put in place support and training mechanisms to ensure that internal teams understand and effectively adopt the new system. In this way, companies can maximise their chances of successful implementation.
A high initial cost
Firstly, there is a psychological barrier to overcome. Many people compare this cost to zero with the free availability of Excel, a common alternative. However, this comparison does not take into account the specific functionality and increased complexity offered by specialist software.
Another important consideration is that of developing an internal solution. Some people mistakenly believe that this represents a minimal or even non-existent cost, since they are mobilising in-house human resources. However, it is crucial to recognise that there is a real cost to this approach. In fact, if you take into account the time needed to develop the solution and its ongoing maintenance, the cost is often much higher than buying specialist off-the-shelf software.
💡 Good to know
Despite the high initial cost, the return on investment of specialised software is considerable. Firstly, the time saved by sales reps, operations and finance teams can range from a few hours a week to several people working full-time on the topic. Secondly, specialised software will have an impact on a company's sales reps, boosting annual earnings by up to several tens of per cent.
"Over the year, we average 123% individual performance, and Qobra is part of one of the links that provides this motivation and makes us perform on a daily basis."
Clémentine Platel-Paris, Head of Sales Southern Europe at Spendesk
4. 6 factors to consider before choosing a commission management solution
When it comes to choosing the best solution for managing sales reps' commissions, there are a number of factors to consider. Each option (Excel, an internal solution or the purchase of dedicated software) has its own advantages and disadvantages, depending on your company's specific needs.
Here are the main factors to consider:
Company size and complexity of commission structures
Excel
For companies with simple commission structures and few sales reps, i.e. 20 sales reps or less, Excel can be a viable option due to its simplicity and flexibility.
Internal solution
For companies with large teams of developers dedicated to building internal solutions, with technical skills around commissions and complex commission structures, an in-house solution may offer better adaptation to the evolving needs of the business.
Software
Companies with a sales force of more than 20 sales reps and/or a sophisticated commission structure often need dedicated software to manage their staff's commissions effectively.
Budgetary constraints
Excel
Excel is generally the least expensive solution, as it only requires a subscription to Microsoft Office.
Internal solution
The initial cost of development may be higher, but in the long term, an in-house solution may be more cost-effective for companies planning significant growth.
Software
Commission management software can represent a significant initial investment, but automating it will save you considerable time and money in the long term.
Ability to integrate with existing systems
Excel
Excel can be used on its own, but it is very difficult to integrate it with other systems such as CRM, as this often requires very complex additional manual work.
Internal solution
An in-house solution can be designed to integrate seamlessly with your company's existing systems, offering seamless synchronisation of data. However, the financial and human cost is often very high, as it requires complete, bespoke development.
Software
Commission management software is designed to integrate with various CRM, ERP, HR and payroll systems, enabling rapid and complete automation of the process.
Support and maintenance requirements
Excel
Support is limited to internal resources and maintenance can be tedious due to the risk of human error.
Internal solution
There is total control over support and maintenance, but this requires internal resources to manage updates and any problems.
Software
Software suppliers generally offer technical support and regular updates, which drastically reduces the in-house workload.
Regulatory compliance needs
Excel
With Excel, you are responsible for ensuring regulatory compliance, which can be difficult without the right measures in place.
Internal solution
You can customise your solution to meet the specific regulatory compliance requirements of your industry.
Software
Commission management software can be designed to support a variety of regulations, offering peace of mind when it comes to compliance.
Future scalability and growth prospects
Excel
Excel can be limited in terms of scalability, which can be a problem as your business grows.
Internal solution
By building your own solution, you can scale it to meet the future growth of your business.
Software
Commission management software is scalable and adapts to the growth of your business thanks to modular functionality and regular updates.
In summary, the choice between Excel, an internal solution or dedicated software to manage sales reps' commissions will depend on your company's specific needs in terms of size, complexity, budget, compliance and future growth. By carefully evaluating these factors, you can make the best decision to optimise your commission management process and boost the performance of your sales reps.
The last word...
Commission management is the cornerstone of any effective sales compensation strategy!
In this article, we have explored three main approaches to managing commissions: Excel, an internal solution and the use of dedicated software. Each of these options has advantages and disadvantages, and the choice will largely depend on the specific needs and priorities of your business.
For small businesses with simple commission structures and a limited number of salespeople, Excel can offer a quick and cost-effective solution. However, it should be noted that the limitations of this approach quickly become apparent as the business grows and commission management needs become more complex.
Creating an internal solution may seem attractive to large companies with in-house resources and a large budget. However, it can be an expensive and time-consuming undertaking, with risks associated with long-term maintenance and scaling.
Finally, using dedicated software offers many benefits, including efficient automation, flexibility to manage complex commission structures and specialist support to meet changing business needs. Although this involves an initial investment, it can offer a significant return in the long term by streamlining processes, reducing errors and enabling in-depth analysis of sales performance.
It is essential that companies carefully assess their commission management needs and make an informed decision based on those needs. Whichever approach is chosen, it is important to remember that effective commission management is a key element in motivating and rewarding your sales team, which can have a direct impact on the performance and profitability of your business.
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