Commission on what's sold or on what's collected
On what's sold: the rep gets the whole commission when the client signs. It's simple, but if the client stops paying, the company has already paid a commission on a sale it never collected.
On what's collected: the commission is split the same way as the sale. If the client pays in six installments, the rep gets their share of each installment when it clears. The rep stays motivated to close well, and the company only pays on money that came in.
An example with numbers
A sale of 6,000 paid in 6 installments of 1,000, with a 10% commission.
- On what's sold: the rep gets 600 on signing day.
- On what's collected: the rep gets 100 each time an installment is collected. If the client pays all six, it's the same 600.
- If the client stops paying after the fourth installment, on what's collected the rep got 400 and the company didn't lose the remaining 200.
The numbers are illustrative: the logic is the same for any amount, percentage or number of installments.
What the system needs to handle
- Each sale with its installment plan, due dates and payment method.
- Each installment marked as collected when it clears, not when it's promised.
- The commission generated automatically at the moment of collection, per rep.
- Different rules by product or by rep, if any.
- Reminders before each due date and alerts for overdue installments.
- A report per rep with what was sold, what was collected and the commission to pay for the period.
Why the spreadsheet stops being enough
With few clients, a spreadsheet with one row per installment works. When there are several reps, hundreds of active installments and payments coming in through different methods, errors appear: collected installments nobody marked, commissions paid twice and arguments at month end.
A collections and commissions system connects CRM sales with payments, calculates everything automatically and shows each rep only their own data.
How to explain it to your team
Switching from commission on what's sold to commission on what's collected changes when each rep gets paid, so it's worth explaining it well before rolling it out.
- Show with an example that, if the customer pays in full, the total commission is the same.
- Explain what the rep gains: sales that stick get rewarded, not just sales that get signed.
- Set the start date and what happens with earlier sales.
- Give each rep a report where they can see their collected installments and what they're going to earn.
When each person sees clear, up-to-date numbers, month-end arguments drop a lot.
Cases to define up front
Simple rules cover most sales, but there are always special cases. Better to decide them now than to argue about them later:
- What happens if the customer cancels before paying in full.
- What happens if they pay several installments at once or everything up front.
- Whether the commission changes by product or payment method.
- What happens with sales shared between two people, such as a setter and a closer.
- What happens if the rep leaves the company and the customer keeps paying.
Whatever you decide for each case should be written down and set up in the system, so the calculation is always the same. Since these rules can have employment or tax implications, it's a good idea to review them with your accountant or advisor.