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2012/02/13

Meet the Parents: Commissions in NetSuite

NetSuite’s commissions module allows a lot of flexibility for setting up the way your company wants to pay your sales persons and/or partners. Using the commission schedules you can build complex commission plans in which you’ll be able to assign to specific people for a given time period.

A common business model is to pay commissions based on the type of item sold. Let’s take the example of an electronics company who wishes to promote the sales of video games. This company would want to give an 8% commission only for the items who fit the mould of the video game category; setting this up in the commission schedule is not as straightforward as it sounds. Using the above example we set up the basis of the schedule as follows:

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We will base the Commission on Sales per Transaction Line Item, which means that the commission will be paid based on the Sales amount of the item.

The next step is to categorize the Transaction Line Item and this is where it gets interesting. You only have eight options here : Classes, Parent Classes Only, Items, Parent Items Only, Locations, Parent Locations Only, Departments and Parent Departments Only. The limitation of these categories is as follows:

First, if you choose the Items option every single item will be listed and you will have to find each individual video game item and set its commission value. This can get complicated if you have 10 thousands items. And you would need to come back and edit the schedule for each new video game item added to your system. This is simply not a viable option for our situation.

The second option is to use one of these three: Location, Class or Department. This will allow you to classify your items based on the common NetSuite locations, classes and departments fields (Setup-Company-Departments/Locations/Classes). The issue here is that you might already be using these classifications for other purposes since these fields can be used on pretty much every single record in NetSuite. Let’s say that you already use them to classify your transactions, it would be counterintuitive to use them for items also. So now you’re stuck using the limited Items category, right? Meet the parents.

If you select the Parent Items Only category you will have to set the commissions only for each parent. So, all you need to do is have an item called Video Games and set up each sub item of this category to have Video Games as their parent.

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Then on the commission schedule you can select to apply a commission of 8% directly on the parent item Video Games and it will affect each child item linked to it. This gives you a lot of flexibility since you can have any number of levels in your hierarchy. Let’s say that you want to have a sub-category for Wii Games all you would need to do is create an item called Wii Games and set this item to have Video Games as a parent.

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When you select Categorized by Parent Items Only on your commission schedule you will then see only the parent items, which simplifies setting up the commissions immensely since you now only have to go through your small number of categories instead of your large amount of items.

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Two things to keep in mind when using the parent items for commissions:


  1.  Each new item added to the system that you want to pay commissions on must be correctly categorized (setting up his parent)
  2.  Each existing item that you want to pay commissions on must be correctly categorized also. If you have a lot of items you can use either a Mass Update or a CSV Import to update your existing items.

You now have a strong base on how to use the parent items to your advantage when setting up your commissions.

Author: Frédéric Jannelle

2 comments:

  1. Frederic:
    My company is trying to setup a commission plan based on line item profitablity as our organization is a consulting firm with a varity of items. (i.e. Services, software, renewal, training and sustainment) as such they all have different comission percentages. We have setup the plans and schedules, but seem to have an issue with getting the commission to go off of profit. Netsuite support has been challanged to help. Any help you can give would be greatly appreciated. Jeffrey

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  2. Hello Jeffrey,

    Since you sell services you do not have the benefit of using the 'Inventory Profitability' commission type. The common trick to base commission on gross profit is to use the alternate sales amount (Alt. Sales Amount). You can display this column at the line item level and then populate it with the copied value from 'Est Gross Profit'. This can be done manually but more often then not this is automated using SuiteScript. You then create your commission schedule based on Alt Sales Amount at the transaction line item level. Quotas can also be used for alternate sales amounts.

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