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Configuring Xactly Incent for Commission Expense Accounting

Nov 16, 2016
2 min read
Under ASC 606 (IFRS 15), companies must change their commission expense accounting processes. Xactly customers can configure Incent to make compliance easier.

The Commission Expense Accounting webinar series has centered on the new requirements for accounting that will impact how companies manage future commissions. Our first webinar included four things to know about the upcoming accounting changes from our in-house experts Steve Giusti, VP Corporate Controller and CPA and Caitlin Steel, Director of Product Management.

The second webinar focused more exclusively on how the Accounting Standards Update will change your accounting process for commission expenses. The biggest challenge identified and covered in this series is one that directly affects commission administrators, around meeting data needs. Caitlin reiterated the three challenges she’s identified when it comes to handling the new standard:

  1. Getting the right data
  2. Making accounting estimates based on the right data
  3. Managing the amortization of the asset over time

In another webinar, Caitlin Steel led a thorough walk-through to show viewers how to configure Xactly Incent™ for Commission Expense Accounting. She began by clarifying the latest updates from the FASB Meeting of the Transition Resource Group, which met on November 7th, 2016. While the meeting did not change any of the existing changes or requirements, it did clarify these points:

  1. Costs should be expensed over the term for which the company receives benefits. This could be the contract term for some companies – but this isn’t the case for most companies.
  2. Relevant effort should not be used to determine the period of amortization. It’s not a level of sales effort that determines the amortization, but the time in which the related product will be delivered.

The focus of the third webinar was to ensure you have the right information to support making intelligent estimates and developing workable methods to manage the numbers over time. To those of you using Xactly Incent, here’s what she suggests:

Configuring Xactly Incent

How are you going to configure data within Incent? The smart approach to these changes is to keep it simple. The most important step is identifying the data your company really needs. A word to the wise: understanding the strategy and defining the outputs early on makes the process easier in the long run.

Incentive Strategy as the Starting Point

As sales teams come together to pinpoint the right data needed, there are several questions that are likely to come up:

  • Can we see the total commission paid for each new customer acquired?
  • Do we expect to continue to do business with this client? Or, are renewals likely?
  • Is the commission we pay for renewal commensurate with the commission paid in the original contract?
  • When we cross-sell, does that sale impact the goods or services previously sold?

Once we understand the nature of our transactions and how they impact what we sell, we can then understand what data we need to collect. The point we’re trying to make: spending the time to sort out the data earlier will make your job easier later.

Capturing the Data in Incent

Incent already has data that can be captured within the solution, that is sticky with the commission calculation. If you put in transactional information, you can attach information about that transaction that carries all the way through the commission results.

This same idea applies to the many kinds of data you work with every day: Quota, rules, customers, products, order items, as well as custom fields.

For example, Xactly Incent has different functionalities that give users visibility into strategizing based on what the quota is telling you. Another example would be Xactly Incent Rules Engine, which tell users how to treat a specific customer’s transaction or commission.

Evaluate Results Data

You’ll need to draw out these results in your commission expense accounting. You have the ability within Incent to evaluate the results data that you’re able to capture. The existing features in Incent that can be used to report on the data would include: Results, saved search, downloads and analytics.

  • Incentive Compensation
  • Revenue Recognition (ASC 606)
  • Sales Performance Management
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Xactly News Team

The Xactly News Team reports on the latest product, events and market trends taking place within Xactly and throughout the revenue intelligence industry.