Your accounts give you a hefty amount of basic information on your business – but what if they’re wrong? Well to put it simply – you’ll end up in trouble of course.
One of the most commonly miscalculated areas in business’s accounts tends to be in the area of commissions and payments to sales people.
People that earn money on commission often have complex arrangements with the company. They may end up receiving different percentages of commission for different jobs, have different base salaries or there may be other variables in how they’re paid. This can end up making it equally complex when it comes to calculating their pay.
HP’s Problem
One of the most infamous incidents where commission pay was a problem and a sales force tracking system made a mess was at HP in 2009. In fact, it was so much of a messy situation; three of HP’s own employees took HP to court and tried to sue the company. They subsequently lost the lawsuit.
According to The Wall Street Journal, HP had been using a commission calculation system to pay its workers, which had been used as far back as the late 1990s for paying employees. It had been originally used by Compaq and then was used by HP when it acquired Compaq in 2002.
By 2009 the system was well over a decade and according to The Wall Street Journal created a notable issue with commission due to a glitch. This glitch resulted in 2,000 of HP’s 23,000 sales people being affected. In fact, some it turned out hadn’t been paid the correct commission or wage for the whole of the year.
Problems Caused By Accountancy Issues
The issues created by such an occurrence is not merely an immediate accounting one – there are far reaching implications for making mistakes like this and not paying salespeople their due.
Sales
If a company is claimed to not be paying sales people for their work, these sales people may not work as hard as they could and therefore aren’t making the sales for the company. This can greatly affect a business and cause all sorts of larger problems.
Shareholders
Of course, if it’s a public company this can also cause problems with confidence. Shareholders and shares can be easily spooked and a dip or rise or anything out of the ordinary in a business where commission is paid can be attributed to accounting mistakes and this can hurt the stock price and also the worth of the business. Hardly something that a business wants along with having to repay workers for money they are already due.
These are only a couple of the issues that can be created by such mistakes – fortunately there are a number of answers.
The Solution
Adding a commission calculating software services such as qcommission.com to your businesses accountancy software can go a long way to solving the problem. It can easily and quickly calculate the money that’s due to people for their efforts and means the chances of a mistake such as this one are not likely.
About the Author: Cormac Reynolds has written articles like this one for a number of websites in the past. He enjoys sports and the great outdoors too.
