Commission on Sales in Microsoft Dynamics 365

Commission on Sales in Microsoft Dynamics 365

Consignment Inventory Sales commission is a common practice used by employers to motivate employees to increase sales. A commission is a monetary sum paid to sales team from employer defined as a percentage of sales. This means that the cost of selling the product is increased by the amount of commission paid and therefore needs to be recorded.

Typical sales commission structure includes revenue based and margin based structures. Revenue based structures usually work well where prices are fixed though it really depends on company goals. For example a company may wish to increase revenue while being less concerned with profitability.

The phenomenon is widely used across a range of industries including telecom sector, real estate, food chains, trading industries, retail etc.

Commission on Sales – Microsoft Dynamics 365

Microsoft Dynamics 365 provides a flexible mechanism to account for complex commission on sales scenarios. It provides for assigning sales representatives to item wise commission or customer wise commission, or both at once. There is even further segregation for commission to be paid by individual item/customer, group of items/customers, or all. Segregation is also allowed on sales persona on three levels.

  • Individual sales representative
  • Sales group
  • All sales representatives

Consignment InventoryIn case of sales groups, individual sales reps are clubbed into groups according to business logic and total commission is divided between group members as per their defined share.

To fulfil this requirement, Microsoft Dynamics 365 provides a complete mechanism to record commission expense on sales. There are a number of setups that will eventually combine to complete the commission calculation.

We will look at different steps and forms that are required and how they collaborate eventually to compute commission calculation.

Setups

To calculate commission on Microsoft Dynamics 365, three types of groups are available to base the calculation on.

  1. Customer groups for commission
  2. Sales groups
  3. Item groups

  1. Customer groups for commission
    • Navigate the following path: Sales and marketing > Commissions > Customer groups for commission
    • Click New to create new commission customer group. This form will determine how the customers are categorized by legal entity that the sales person can receive commission on.

      Customer groups for commission

    • Now this customer commission group can be assigned to a customer.
    • Navigate to customer form > Sales order fast tab. The commission group will be selected here so a commission will be computed on sales order.

      Customer groups for commission

  2. Sales groups
    • Navigate the following path: Sales and marketing > Commissions > Sales groups
    • Click New to create new sales group. Each group can have multiple number of sales representatives.

      Customer groups for commission

    • Navigate the following path: Sales and marketing > Commissions > Sales groups > General
    • Click Sales Rep.
    • In the next form that opens, determine which users are part of sales group defined.
    • Additionally, each user’s share of group commission can also be defined here.
    • This is not a manual field and the users are called from users defined in Legal entity.

      Customer groups for commission

    • Navigate to customer form > Sales order fast tab. The commission group will be selected here so a commission will be computed on sales order.

      Customer groups for commission

  3. Item groups
    • Navigate the following path: Sales and marketing > Commissions > Item groups
    • Define the group of items for which the legal entity will want to base the commission on.

      Customer groups for commission

    • Navigate to Product Information Management > Released Products. Choose product for which the sales team will earn commission and go to sell fast tab.
    • Assign the item group created to item under the administration section

      Customer groups for commission

    • Now we have all the necessary forms setup and assigned to create a commission computation.
      Navigate to Sales and marketing > Commissions > Commission calculation


      Customer groups for commission

      We can create different relations here to calculate different commissions.

    • Items can be grouped, singled out or the commission can be setup to apply to all items.
    • Similarly commission to customers can be setup as group, single customer or all customers.
    • Commission to Sales reps can also be setup sales group wise, single sales rep or all sales reps.
    • In COMMISSION BASED ON section, we can decide the application of commission such as after total discount, before line discount, based on Margin, based on Revenue etc.
    • We will setup the commission percentage here. This is total commission and this will be split between individual sales reps based on their relevant percentage share mentioned above.

Commission Posting

The last and most important setup is commission posting. Since commission paid is an expense, it will be recorded and posted to a main account.

To setup commission posting, Navigate to Sales and marketing > Commissions > Commission posting

Customer groups for commission

Select a main account for commission and commission offset. Again posting can be set for an item and customer on different relations of Table, Group and All. After setting up posting profiles we are all setup to calculate commission.

Create a sales order and invoice it. Once the invoice is posted, Click invoice under JOURNALS section. In the next window that opens click Commission calculations under DETAILS section to view the calculated commission on sales order and spread between the sales reps.

Customer groups for commission

The level of flexibility that Microsoft Dynamics 365 provides for executing complex commission calculations enables better decision making. It also offers a creative compensation range which is helps motivate the sales representatives.

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Shoaib Mehmood's picture
Shoaib Mehmood is a Business Analyst at Systems Limited. He has been providing his services as functional consultant in ERP for over two years. Born in Gilgit, he is currently positioned in Lahore. He is ambitious about discovering complex business scenarios and construe their solutions, over Microsoft Dynamics 365.

Disclaimer: The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of Systems Limited, or any other entity related to Systems Limited.

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