Escape Excel H*ll: Complex Commission Calculations
Turner Levison | January 25, 2019
A significant part of the commercial real estate process is making sure all of the agents and Realtors are paid correctly. Most brokers’ earnings are 100% from their commissions earned, so getting it right is of the upmost importance. If they work on a tiered commission plan, and those types of plans often have tiers/break-pints that reset annually. So what happens when a broker crosses those tiers in one check? What occurs when a check comes in that is not for the expected amount? How much time do brokerages actually spend on the “bean counting” aspects of their operation? Those questions all affect how much gets done when it comes to handling financial issues, and the more automated the process the easier it can be to get things done the correct way and on time. We all know payroll errors can be costly and time consuming.
The Complexity of Current Commercial Real Estate Commissions
To handle over-the-term commission and other types of calculations that can quickly get confusing, a brokerage needs a commission management platform (CMP). That wasn’t really a requirement in the past, because commissions were much more straightforward. But times have changed. Commissions are getting more complex as brokers have to be more creative to win deals. This has put pressure on the back office to keep up, and sometimes that pressure has become too much. Mistakes get made, agents and brokers get frustrated, and it can be more difficult to keep good talent at a particular brokerage.
Xactly and Callidus are at the top of Gartner’s Magic Quadrant for traditional sales performance management. In the commercial real estate brokerage world, a CMP must be carefully designed with the broker in mind. It must handle complex calculations that can only happen once “the check” arrives. Otherwise there can be guesswork calculating what should be paid to an agent when a deal closes. A CMP that frees up the back office for other tasks and also builds a level of trust when it comes to getting paid correctly is of the upmost importance for brokerages.
Spreadsheets Just Aren’t Enough Anymore
That Excel spreadsheet that used to get the job done pretty easily is just not going to do what’s necessary any longer. It is now a full time job to update the database and keep everything functional when tracking commission payments. Every check that comes in must be documented and balanced against that deal’s ledger, or dollars can slip through the cracks. Even the best standard spreadsheet program will have trouble with the calculations needed and the adjustments that have to be made as a broker moves from one tier of commission through another one and into still another one from a lucrative deal that has just closed. Relying on spreadsheets when things are that complicated is just a recipe for unfortunate mistakes to be made.
It’s Time for a Commission Tracking Platform built just for CRE
Any brokerage can better automate complex commission calculations by utilizing a CMP. These types of platforms exist for exactly this reason: to automate commission calculations no matter how complex, and provide the right amount that needs to be paid quickly and efficiently. There is no need for “bean counting” at that point, and no need for someone who may not clearly understand the process to attempt to calculate the right amount of commission. By choosing a commission management platform like CommissionTrac, brokers can finally have peace of mind.