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Accelerator (aka Kicker)
A higher commission rate which raises compensation in comparison to what they would have received on their standard commission rate. Accelerators are used to recognize and reward exceptional performance. They typically kick in once a salesperson has met his or her quota.
Accruals
Accrual basis is a method of recording accounting transactions for revenue when earned and expenses when incurred. The accrual basis requires the use of allowances for sales returns, bad debts, and inventory obsolescence, which are in advance of such items actually occurring
Analytics
Sales analytics refers to the data gathered, monitored, and analyzed in the sales process. It assists the sales team in making educated judgments regarding prospects, customers, product lines, market potential, and sales team performance.
ASC 606
ASC 606 (IFRS 15) changes the way that companies recognize revenue and amortize corresponding expenses. For sales compensation purposes, it requires finance to amortize commission expenses for individual sales reps over the length of contracts if the contracts have a term of longer than one year.
Attainment (aka Achievement)
A measure of a sales rep’s performance relative to quota. Actual sales performance is divided by quota to determine achievement/attainment as a percentage.
At-risk pay
At-risk pay aka Performance-based pay is a type of pay dependent on performance. It is not guaranteed pay in the way that a salary is. The majority of sales compensation plans include an “at-risk” component depending on performance. This risk component is paid in addition to the base salary. Other names are incentive compensation, variable compensation, and pay-for-performance.
Audit
A Sales Audit is the comprehensive, systematic, periodic, analysis, evaluation, and interpretation of business environment, objectives, strategies, principles to determine the areas of problem or opportunities and recommending the plan of action to improve the sales performance. The sales audit is performed by the sales auditor, who can be from within the organization or from outside the firm.
Bookings
Sales booking is when a customer commits to spend money with your company, e.g. when the deal is “booked”.
Bonus
A sales bonus is an incentive payment often triggered by whether a sales rep achieved a threshold. This is different from a commission, which is paid progressively when greater levels of performance are attained (i.e. a rep may make a commission on each deal). It’s crucial to remember that not all sales compensation experts use the same terminology. Some sales compensation professionals use the terms “bonus” and “commission” interchangeably.
Cap/Floor
The maximum cash compensation an employee can earn in a given time period.
Channel
A sales channel is a method used to sell items or services to the market. A company’s products or services might be distributed or sold through direct (website, salesforce, etc.) or indirect (brokers/agents, partners, etc.) channels.
Clawback (aka charge back)
The act of taking back sales compensation after a sale is canceled, charged back, or unpaid. This is usually done by deducting the amount to recover from future payments.
Commission Rate
The commission rate is the rate applied to the sale to produce an incentive payment. It can be expressed as percent or dollars.
Compensation Administration
The process used by a sales organization to ensure proper payout of a salesperson’s commissions.
Compensation Plan
A sales compensation plan is a program for determining how much a sales rep earns based on their performance. It includes details about all aspects of a salesperson’s earnings, such as their base salary, commission, bonuses, and benefits.
Dashboards
A sales dashboard is a visual representation of a sales rep’s performance and is designed to provide insight to motivate an increase in performance. Dashboards are typically dynamic in the sense they refresh as new data is made available vs. a timestamped static report such as a compensation statement.
Decelerator
The opposite of an accelerator. A decelerator is a reduced commission rate that decreases a rep’s payout relative to what they would have earned with their base commission rate. Decelerators can be used to penalize poor performance (before a rep hits quota) or avoid excessive payouts (after a rep hits quota).
Direct Sales Credit
A direct sales credit is the action of applying (giving credit) to the sales rep responsible for the sale. This differs from an “indirect credit” where typically a manager is being credited based on the sale of a subordinate.
Draw
Funds a sales rep borrows in exchange for future commissions. Draws can be “recoverable” (the salesperson must repay the corporation with future commissions) or “non-recoverable” (no need to pay it back). Draws are commonly utilized by new reps to bridge the gap between when they start working and when they begin getting commissions on sales.
Guarantee
A minimum amount guaranteed to be paid to a salesperson which may or may not be reduced from future commission payments.
Hierarchy
Sales hierarchies are leadership structures with managers in charge of progressively smaller groups of employees. Sales job titles in the hierarchy range from sales associate to vice president of sales.
ICM
Acronym for “Incentive Compensation Mangement” refering to software that assists Sales Compensation Administrators in automating processes such as performing computations and creating reports, with the added benefit of avoiding mistakes associated with spreadsheets.
Indirect Sales Credit
An idirect sales credit is the action of applying (giving credit) to the manager of the sales rep responsible for the sale. This differs from an “direct credit” where typically a sales rep is being credited based on their own sale.
Key Performance Indicators (KPI’s)
Key Performance Indicators (KPIs) are metrics that assist in tracking progress toward goals such as corporate initiatives. KPIs for growth might be revenue, whereas KPIs for profitability could be net margin.
Margin
Sales margin is the amount of profit generated from the sale of a product or service. It is used to analyze profits at the level of an individual sale transaction, rather than for an entire business.
MBO (Management by Objectives)
In sales, Management by Objectives is the process of assigning an employee tasks based on overarching company goals. The process gives company employees an understanding of how their job functions relate and contribute to company success.
OTE (On Target Earnings)
On-Target Earnings is the amount paid to a sales rep if all objectives are met. A salesperson’s compensation earnings are made up of basic pay as well as variable components of a compensation plan such as bonuses and commission.
Override
Sales commission override is a form of indirect payment, similar to a roll-up, in which an employee receives a percentage compensation for a sale, made by another employee.
Proration
Proration enables an organization to adjust a user’s compensation based on a prorated time period instead of the compensation period. This may be necessary if the employee has not been with the organization, in the position, or in their current salary for the entire compensation period.
Quota
Quota, also known as goal or target, is the amount a salesperson must sell to receive commission for a specific period.
Roll-Up
A rollup is a sales commission rolled from one payee to another based on the two’s organizational reporting. For example, a salesperson receives credit for a transaction and reports to a manager who also receives credit.
Split
Incentive payments that are split between two or more employees.
SPM
Sales Performance Management supports the planning, management, analysis, and improvement of a sales organization’s performance. SPM aligns sales focus with both sales strategy and corporate goals.
Territory
Territories are groups of prospects and customers that are assigned to certain salesperson or team to sell products or services. Each team is in charge of its own region and is commissioned accordingly.
Tiered Commission
Tiered commissions are a form of sales commission structure that helps encourage reps to continuously improve their sales performance to meet and exceed quota
True Up
True-up is a method of payment adjustment to match or reconcile differences between two balances. The adjustment occurs at a defined true-up frequency. True-up adjustments are typically issued after all other payment calculations are completed.
Variable Pay
Variable Pay also referred to as “pay-for-performance” or “at-risk” pay, is the amount of sales compensation determined by the payee’s level of attainment or performance. When a payee performs a little more than usual, his/her pay increases, and when a payee underperforms, his/her total income takes a hit and decreases.
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