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01 November 2012
Aligning Finance & Sales for Compensation Management

Aligning Finance & Sales for Compensation Management


By Ben Turner @ 11:43 :: 3881 Views :: 4 Comments :: Article Rating :: Featured Articles
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Sales compensation has become both more complex yet more critical to a company’s growth and success. While most finance departments struggle to manage the process, many run the risk of possible non-compliance or damaged good will and relationships due to errors resulting from conventional systems.

Leveraging sales compensation management positively impacts a company’s top and bottom lines because it aligns sales behavior directly to corporate financial objectives for increased sales performance and profits.

Managing the sales compensation process effectively enables a more productive and efficient sales organization that is not only motivated, but also has real-time visibility into their individual and team performance.
 
Mark Smith, CEO and executive vice president, Ventana Research, stated in a Webinar devoted to the topic of sales compensation management from the financial perspective, “Many acute challenges include driving, tracking and monitoring better accuracy and providing consistency, oversight and legal compliance.
 
It’s a complex process, but it has to be executed effectively—not with the technical, operational or financial silos that are common today—but by providing insight, accuracy, agility, strategic solutions and improving process quality.”
 
 
How Xactly Corporation Manages Processes, Helps Customers Maximize Profit
 
At this critical moment in the evolution of the industry, Xactly Corporation delivers automated on-demand sales compensation solutions that enable companies to improve sales effectiveness and increase sales productivity. Today, with most companies using spreadsheets to manage their incentive compensation, often sales are unmotivated, resulting in unpredictable sales results.
 
Xactly Incent ™ allows companies the ability to easily and affordably design, implement, manage and audit optimized incentive programs. The Xactly Incent on-demand sales compensation management solution is used by sales and finance executives, compensation analysts, sales operations and sales professionals in mid-sized companies across a variety of industries. The combination of the right incentives with complete visibility motivates companies to incentivise correctly and sell more.
 
Xactly has already succeeded in culling best practices for sales compensation management. With a management team combining more than 30 years of domain experience, this is just another reason why Xactly is already the leader in this industry space.
 
 
Best Practices for Sales Compensation Management
 
No. 1: Align Finance and Sales for Growth and Profits

In our poll conducted among finance officers and compensation analysts, the majority responded that finance and sales are aligned in their company (32% Very Aligned; 56% Somewhat Aligned). This favorable response to this best practice is significant as aligning finance and sales allows the following to occur:

 
It assures accuracy of sales forecasts and performance
• Alignment gives the flexibility to design, model and change comp plans to impact bottom line
• Senior managers must have visibility into actuals and receive automated alerts when policy violations occur or are suspect
• Compensation committee members of a Board of Directors increasingly will want access to data
• All decisions about compensation require some balance between centralised and decentralised control
• Compensation decisions must be communicated up and down the organisation
• Results of decisions regarding senior manager compensation will have to be formally documented and recorded
 
 
No. 2: Automate and Centralize the Sales Compensation Process

Interestingly, only 18.2% of the same group reported that they could easily provide Web-based reporting and real-time compensation statements to their variably paid employees. Moreover, only 33.8% said that they could electronic ally route and track compensation plans and certification letters to comply with any regulatory requirements. This opportunity- automating and centralising the sales compensation process-is significant for the following reasons:

 
• Visibility and insight into key performance indicators (KPIs)
• Consistency and predictability
• Robust analysis, audit tracking and reporting
• Accurate and timely commission payments
• Electronically route and track compensation plans and certification letters to comply with regulatory requirements
• Model and analyze compensation plan changes in advance of implementing them


No. 3: Align Payments to Performance

In addition, the same poll showed that most companies reward the sales of higher margin products or improved discounting practices (58%). Doing so allows companies to perform the followin g:
 
• Incentivise on discount percent
• Create Special Performance Incentive Funds (SPIFs)
• Vary commission rates by pro duct
• Use cash and non-cash rewards
• Provide robust analytics and dashboards to drive sales performance efficiency and visibility
 
In this manner, when finance reward sales, results may be measured and used for future analytics and forecasting.
 
 
No. 4: Model, Forecast and Plan
 
Lastly, according to the same poll, most companies cannot easily model compensation plan changes in advance of implementing them (72.2%). However, modelling is significant because companies can perform the following:
 
• Forecast commissions expense using actual or projected orders to accurately determine future cash requirements
• Model compensation plan changes and see the upside and downside risk before taking action
• Change the organisation structure and view the effects on both the top and bottom lines
• Be responsive to market opportunities by removing constraints to action
• Promote modelled changes seamlessly into the live environment with confidence
 
 
Xactly Drives Change, Shapes Outcomes

With Xactly Incent and its suite of modules, from analytics and data management to modelling and new modules being unveiled continually in near terms, can align finance and sales to drive organisational change while producing bottom-line results.
 
Partner and customer relationships contribute to Xactly Corporation’s unique potential in its industry space, a network including salesforce.com, RightNow Technologies, Success-
Factors and Oracle .
 
For more information, visit

Even today, most companies still use spreadsheets to manage incentive compensation (77.2%) according to the poll, problematic when used for repetitive, collaborative enterprise-wide tasks with compliance or regulatory implications.
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