Sales Compensation Glossary

Compensation plan design is the process of designing a plan that includes components that add up to a sales representative's base salary, commissions, bonuses, etc., by aligning them with business goals and financial objectives. Plan Design Modeling examines several plan design choices and evaluates how different levels of sales results will affect the total commission budget and how this would affect plan members.

A person's place in an organizational structure or hierarchy is known as his/her position. It outlines their responsibilities within an organization. Examples of certain positions include regional sales manager, sales manager, inside sales representative, outside sales representative, sales assistant, sales engineer, etc.

Extra compensation or monetary sum added to an employee's regular wage (e.g., overtime, double-time for holidays, etc.). This could also refer to the cost of an insurance contract in an insurance parlance (e.g., a life insurance premium).

Adjustments made to the payout element of an incentive by qualifying requirements, such as length of service or probationary periods.

A sales-qualified lead is a prospective customer that has been researched and vetted according to an organization's lead qualification criteria — first by an organization's marketing department and then by its sales team — and is deemed ready for the next stage in the sales process, i.e. they are ready to be pursued by the sales team for conversion into a paying customer.

A quota, also known as a goal, aim, performance target, or target, is the amount a salesperson must sell within a specific time (month, quarter, year) to receive a commission. It can be stated in terms of absolute numbers, percentages, or the number of products or services sold or recovered by future payments.

Quota attainment is a measure of a salesperson's performance that calculates the percentage of their sales quota that has been achieved within a given time period. It is an important metric for sales managers to track and can be used to evaluate individual sales reps, the effectiveness of the sales team as a whole, and identify areas for improvement. Consistently meeting or exceeding quota is a key indicator of a top-performing salesperson, while falling short may result in corrective action or termination.

A recoverable draw is an advance payment made to an employee against future earnings, often used in industries with commission-based compensation. The employee receives the draw in advance and repays it over time from their future earnings. If the employee doesn't earn enough to repay the entire draw amount, the difference may be written off by the employer as a loss. The purpose of a recoverable draw is to provide financial support to employees with irregular income streams or who are just starting out in their roles.

Popular in the Software as a Service (SaaS) business subscription model, recurring revenue in sales refers to payments made at specified intervals, such as ARR (Annual Recurring Revenue), QRR (Quarterly Recurring Revenue), and MRR (Monthly Recurring Revenue) (Monthly Recurring Revenue).

According to Canidium, a retroactive input or decision is one that must be implemented as of a date that has passed. Hence, back payments or other changes to earlier payments may be required.

Revenue Recognition is the process of accounting for revenue earned by a company, which involves recognizing revenue when it is earned and matching it with the expenses incurred to earn that revenue. It is important because it provides information about a company's financial performance, and is used by stakeholders to evaluate the company's profitability and financial health. Revenue recognition is governed by various accounting standards and typically involves following a five-step process to determine when revenue should be recognized.

Rollup refers to a sales commission that is transferred from one payee to another based on their organizational reporting connection. For instance, if a salesperson receives credit for a sale and their management also receives credit for the same sale, this is known as a rollup.

Sales (Incentive) (Incentive) In exchange for selling a specified quantity of items or services, sales personnel (such as sales representatives, sales management, and sales support) are compensated. It is not fixed or guaranteed like base pay. Rather, it is paid in addition to it. Most sales compensation schemes include a performance-based "at-risk" component. Also known as incentive compensation, variable compensation, pay-for-performance, and at-risk pay.

The sales commission is a form of variable pay that salespeople receive for closing the deal and keeping the client for the long term.

Plans for sales commissions include all components of a sales commission, including rules, eligibility requirements, base income, and variable commission pay.