Sales Commissions

Sales commission is a little bit more complicated issue than it might seem at first glance. Essentially, it is a tool to motivate your sales personnel generate the maximum amount of financial value. Not sales per se, not gross profits per se, not even net income per se. But financial value. In more practical terms, the best proxy – free cash flows.

Which requires a more comprehensive and personalized compensation system than just simple ‘percentage of gross sales’. Therefore, your ‘sales commission item’ is total amount of variable compensation paid to your in-house salespeople. Plus whatever you pay to your outside sales agents (these are usually given a % of gross sales).  

Sales Net of Commissions is what goes to your corporate coffers after you pay your salespeople (in-house and external) for selling your products and services.