Using manual spreadsheets to manage sales compensation makes for a time-consuming process. Here's the breakdown of life with Excel and life with automation.
Spreadsheets are the most common tool used to manage data in sales organizations. In fact, more than 75% of companies rely on spreadsheets for their sales planning, forecasting, and sales compensation management. However, the business landscape is growing increasingly competitive—can traditional spreadsheets keep up?
The truth of the matter is this: spreadsheets are the easiest route for housing sales data, especially sales compensation management because they're convenient—they're what you're comfortable with because you've used them for years, Sure they have their frustrations—manual entry and testy formulas—but things could be worse. You could be working in general ledgers, and those were a real pain.
But there is an alternative to using spreadsheets for sales compensation management—automation technology. You're not alone in your reservations, if you have any. In fact, 80% of CFOs recognize that investing in data can help them replace spreadsheets; however, they remain deterred by the perceived cost and complexity of new systems (2 EY Annual Survey).
To help you see life before and after spreadsheets,—and dispel any myths—here is the breakdown on spreadsheets vs. automation for sales compensation management.
Spreadsheets vs. Automation: Data Accuracy
You need accurate data for every part of your organization to run effectively, especially for sales compensation management. Here's how spreadsheets and automation compare for data accuracy.
Spreadsheets
Spreadsheets will hold your data, but there's no way to guarantee it's accuracy. Unfortunately, more than 80% of spreadsheets contain errors. That means there's an 80% chance your data is incorrect. If more than one person are accessing these spreadsheets, you also can't maintain version control
The worst offense? One misplaced comma can completely throw off all of your numbers—and you might never even know it.
Xactly CEO Chris Cabrera experienced this early on in his career as a sales rep, and the incident played a large role in the founding of the company 14 years ago. One small error in compensation calculation resulted in him receiving an $80,000 commission check instead of $8,000. When he brought it up to the payroll and compensation teams, no one even knew the overpayment of $72,000 had occurred.
Talk about a costly miscalculation.
Automation
Automation will also hold your data, but unlike spreadsheets, it ensures data accuracy. As a matter of fact, sales compensation management technology eliminates more than 90% of compensation calculation errors. Because the process is digital, you can see a digital trail of edits, changes, and inputs, allowing you to eliminate errors and ensure data is accurate.
Commissions data accuracy is crucial for companies—not just for sales compensation management but also for your accounting team to maintain GAAP compliance. Under ASC 606, companies must expense commission costs and need access to very detailed compensation data to do so. If your data is inaccurate, you can't guarantee GAAP compliance or audit preparedness, which puts your entire company in jeopardy.
Spreadsheets vs. Automation: Commission Payout Efficiency
In addition to payout accuracy, getting sales reps paid in a timely fashion is crucial to maintain harmony, minimize shadow accounting, and maximize sales productivity. Here's how spreadsheets and automation compare when it comes to payout timeliness.
Spreadsheets
Spreadsheets require manual entry of data, formulas, and transfer to payout your reps at the end of each pay period. For the average company using spreadsheets or other manual homegrown solutions, compensation teams spend upwards of 5 hours per month compiling this information.
Once they have all of that information gathered, the entire process takes up to 6 weeks to fully complete compensation data entry, commission calculations, and complete payout.
Automation
Like spreadsheets, the initial set up of automation technology will require uploading formulas and entering data, but once that set up is complete, your payout process becomes much more efficient. Using a sales compensation management solution, the average company takes less than 3 weeks to complete payout.
On top of that, organizations also reduce their compensation resource/hiring costs up to 50%. In fact, one company, Cox Automotive, was able to save 172 hours of monthly compensation admin time by adopting sales compensation management technology.
Spreadsheets vs. Automation: Payment Disputes
Payment disputes go hand-in-hand with inaccurate payments—they both take up a lot of resources. Here's how spreadsheets and automation compare when it comes to alleviating disputes and maintaining a positive relationship with the sales team.
Spreadsheets
Because spreadsheets require manual input, errors will happen. According to the 2018 Sales Compensation Administration Best Practices Report, operating with as little as a 3% error rate means that 11% of sales reps will be mis-paid at some point in the fiscal year.
When you operate with high levels of inaccuracies and payment disputes, you also have high levels of shadow accounting, with reps calculating their own commissions on the side instead of selling. Ultimately, this lowers sales rep productivity and creates distrust with the sales team.
Spreadsheets further escalate the inefficiency problem with payment disputes. Because reps don't realize they're being incorrectly paid until they receive their commission check, they can't go to the compensation team to solve the issue before payout is complete.
Automation
Automation helps eliminate data inaccuracies, which means it also helps eliminate payout disputes because reps get paid accurately. This reduces the need for reps to calculate their own commission, ultimately decreasing shadow accounting to only 0.3%.
Using an automation tool, sales reps gain visibility into real-time performance and can see their estimated earned commission before they get paid. That way, reps can put in disputes before they get paid, which saves everyone time and helps build trust with the compensation team.
Spreadsheets vs. Automation: What's the Best Option?
When it comes down to it, the answer is simple. Spreadsheets, while convenient and the traditional way of doing things, simply can't provide the level of accuracy, efficiency, or visibility into data that companies need to grow and scale. Automation provides benefits that impact not only your sales compensation management, but your entire organization.
Want to learn more about the impact of automating sales compensation management? Download our guide, "4 Best Practices to Increase ROI for Sales Incentive Compensation."
