Sales compensation plays an essential role in motivating your sales team, aligning sales strategies with business objectives, and driving performance. At the same time, managing and calculating commissions and incentives can be a time-consuming, complicated task that is very susceptible to human error.
For this reason, many organizations turn to sales compensation software to automate and streamline their sales compensation plan management. This type of software provides a centralized platform where every aspect of sales compensation can be managed.
How exactly does sales compensation software work, though? Do you have to structure your sales compensation plan around the software itself, or can you create your own custom plan that suits the needs of your company and sales team?
In this guide, we’ll take a look at everything you need to know about sales compensation software, including how it works, the pros and cons of some of the most well-known software on the market, and more.
What Is Sales Compensation Software?
Also known as sales performance management software or sales incentive compensation management software, sales compensation software is a tool that is specifically designed to streamline and automate the management of sales compensation plans.
Using this type of software, an organization can manage, calculate, and administer proper compensation to each individual on their sales team based on their achieved targets and performance.
Having a sales compensation plan is essential to help set expectations and standards, drive results, create structure within the team, create incentives for individual sales reps, and improve your budget. At the same time, managing your entire sales compensation program can require a great deal of time and energy without a powerful piece of software that is customized to your company’s needs.
How Does Sales Compensation Software Work?
When managing your sales compensation plan, the right piece of software can go a long way in automating and streamlining the process. Not only can it save a lot of time, but it can also reduce errors and ensure that timely payments are made.
Try our cost estimator below to receive instant preliminary pricing.
Let’s take a look at some of the most common features and functions of sales compensation software.
Setting Up Your Sales Compensation Plan
Any sales compensation software will allow you to define the parameters of your sales compensation plan to some extent. This is essential to make sure that the software can perform its primary purpose– calculating and managing the sales compensation of your entire team based on your policies, goals, and sales strategy.
At the same time, many of the most popular software options aren’t nearly as customizable as they should or could be. They are designed to fit the general needs of most of their clients, meaning that they will never be tailor-made to your unique organization.
That being said, sales compensation software will allow you to define commission structures, set targets for your team, and establish the formulas that will be used in order to calculate payouts.
Software compensation software can also be integrated with a number of other data sources, such as sales data repositories or CRM systems.
This allows the program to collect the information it needs to calculate compensation based on the parameters you set.
Tracking Sales Team Performance
This type of software can also help you measure your team’s progress against the targets you set while tracking achievement at both the individual and team levels.
This can allow you to access several key performance metrics in one central location, including customer acquisition, units sold, and revenue generated.
Calculating Commissions and Incentives
No matter what type of sales commission structure you have in place for your sales team, software that can automatically calculate sales compensation is going to help save a lot of time and help reduce the occurrence of errors.
Of course, any sales compensation software worth its salt will also calculate the commissions and incentives for each of your sales representatives. You can enter the formula you have set for determining the compensation and incentives salespeople receive when you first set up your compensation plan. The program will calculate the proper payout amounts.
Validation and Review Functions
You will typically find that there is also a validation and review feature in sales compensation software. This gives you the opportunity to review the commissions that the program calculated before the payment is finalized.
While the error is significantly reduced in these calculations by using such a powerful piece of software, it’s still essential to ensure that sales compensation and incentive payments are accurate.
Comprehensive Reports and Analytics
Team leaders can gain a great deal of insight and information from their sales compensation software, as this type of program will typically be able to generate comprehensive reports and analytics on a number of relevant metrics, such as compensation payouts and sales performance.
As you likely know, being able to look at the data from a zoomed-out perspective can help you see patterns and trends that could otherwise easily be missed. By having all of your information in one central location and integrated with other crucial software, you can gain insights into performance at the team and individual levels, make informed data-driven decisions, and much more.
Streamlined Approval Process
Sales compensation software can also help streamline the approval process that complies with your company policies.
The program can automate workflow, and all compensation plans, incentives, and payouts can be automatically sent to the proper department for approval.
Integration With HR and Payroll Systems
The usefulness of your sales compensation software doesn’t end with calculating compensation plans and sending the information to the right venues for approval.
This type of program can also integrate with your HR systems or payroll systems so that your sales team can receive compensation in a timely manner.
What Are Some Examples of Sales Compensation Software?
There are tons of different sales compensation software programs out there, but let’s take a closer look at three of the most popular options.
Part of the SAP Sales Cloud suite, SAP Commissions is software that automates both commissions and incentives for sales teams.
This powerful program offers a wide range of features, including the ability to design complex compensation plans, generate reports and analytics, and automatically calculate incentives and commissions. It integrates with several other SAP solutions, so for companies already engaged in the SAP ecosystem, this can be a reasonable solution.
On the other hand, the robustness of this software also means that it can be quite challenging to get used to. The learning curve is steep, and the complexity can require significant training and expertise to tap into the product’s full capabilities.
The user interface of SAP Commissions also isn’t as intuitive as other options, nor particularly visually appealing. Getting used to navigating the platform can be a hefty task in itself, let alone the time-consuming process of implementing the software.
Also known as SQL Plan Management, Oracle SPM provides a suite of sales performance management tools. These include territory management, quota management, advanced analytics, and sales compensation management.
In the same way that SAP Commissions can be a good choice for organizations already integrated into the SAP ecosystem, Oracle SPM can make sense for organizations that are already using other Oracle solutions, such as Oracle Sales Cloud or Oracle CRM.
While integrating within a larger Oracle ecosystem might benefit some companies, this can be a big problem for organizations that rely on software produced by other companies. Oracle SPM is really dependent on the overall ecosystem, meaning that it can be challenging to integrate SQL Plan Management with non-Oracle systems.
One of the big problems with Oracle, though– and a significant issue with many of the sales compensation software on the market– is the challenges that companies face when it comes to customization.
While there are customization options offered by Oracle SPM, actually getting it to line up with the specific needs of your business often requires a significant amount of technical expertise. Getting the software to work to fit your commission and incentive structure can be difficult indeed and can even mean incurring additional costs on top of the already hefty price tag.
Salesforce CPQ and Billing
A part of the Salesforce Revenue Cloud suite, Salesforce CPQ and Billing incorporates sales compensation management for the entire revenue lifecycle. Able to integrate within the Salesforce ecosystem, their compensation software is powerful enough for companies to design complex compensation plans, generate reports and analytics, automate calculations, and provide real-time visibility into individual and team sales commissions and performance.
Much like SAP and Oracle SPM and their respective ecosystems, though, Salesforce is highly dependent on other Salesforce programs. Additionally, though there is a lot of flexibility when it comes to customization options, these can be difficult to implement and can require significant technical expertise.
Setting up Salesforce CPQ and Billing can require experience or training in order to configure the system in a way that works for your company. While it’s a powerful piece of software, it is ultimately built to be “one size fits most” in a way that can leave you having made a significant investment in software that isn’t customized to your company’s unique needs.
The Pros and Cons of Using Sales Compensation Software
There are a number of benefits to using sales compensation software.
- Efficiency and automation: Many of the tasks that would take a lot of time to do manually can be automated using sales compensation software. This doesn’t just save time, but it can also help reduce the occurrence of errors in managing sales compensation.
- Transparency and accuracy: By entering predefined formulas and rules for sales commissions and incentives, accurate calculations can be made every time. This also means that sales team members can be reassured by the transparency of your compensation program, with a clear understanding of how compensation is calculated.
- Customization options: Depending on the software you use, sales compensation programs can be customized to varying amounts to align with your plan.
- Performance reports and analytics: Organizations can also visually track, in real-time, how their sales team is performing against the targets they set.
- Compliance: This type of software can also help companies ensure that all industry regulations, legal requirements, and internal policies are complied with and provide a central location for accurate records to be maintained for auditing purposes.
On the downside, some of the cons of using sales compensation software include:
- Cost: Not only is sales compensation software not always that cheap in terms of the initial investment, including licensing, customization, and implementation expenses, but there can also be high costs in the ongoing support, maintenance, and updates of the software.
- Integration: Integrating a new piece of software into your HR or CRM platforms can be complicated and frustrating.
- Learning curve: Though these programs can be quite robust, they’re also typically very complex. This can mean that training and onboarding will be required for teams that will be using the software.
- Customization: Actually achieving alignment between your sales compensation software and sales compensation plan can be easier said than done. In order to configure the complex plans that best support your organization, you’ll likely need to bring in IT experts.
Why Popular Sales Compensation Software Often Doesn’t Cut It
One of the problems with sales compensation software is that they are often built to be “one size fits most.” This means that organizations often run into the frustrating outcome of their software not fitting all their needs after they have invested money and time into setting it up.
For this reason, you’ll want to step back and look at your specific needs before deciding on a particular sales compensation software. Customization is key for making sales compensation plans work, and the last thing you want is to have to restructure your plan just to fit into the framework of an expensive piece of software.
At Level6, we create tailored solutions and offer custom software to each of our clients, ensuring that their program meets the company’s unique needs.
There’s a reason why so many companies use Level6 when it comes to sales compensation software. When you’re investing in software to help your organization’s bottom line, the last thing you want is for the program to not be customizable in the ways you need. After all, customization is really what makes a sales incentive program work in the first place.
Are you ready to talk about setting up a truly customized software that is tailor-made for your company? Are you interested in developing an incentive program that will motivate your sales team and help you meet your goals? If so, contact us today to schedule a call.
Claudine is the Chief Relationship Officer at Level 6. She holds a master’s degree in industrial/organizational psychology. Her experience includes working as a certified conflict mediator for the United States Postal Service, a human performance analyst for Accenture, an Academic Dean, and a College Director. She is currently an adjunct Professor of Psychology at Southern New Hampshire University. With over 20 years of experience, she joined Level 6 to guide clients seeking effective ways to change behavior and, ultimately, their bottom line.