How Can I Claw Back Commissions?

How Can I Claw Back Commissions?


Sometimes, you may incur cancellations, non-payment, etc. There are 3 primary ways you can claw back previously paid commissions. In this article, we describe some pros and cons of each approach.
  • Add a Negative Transaction
  • Setup a Claw Back Formula
  • Use a Claw Back Tool

Add a Negative Transaction
One easy way to deal with claw backs is to add new (separate) transactions, with a negative amount, dated forward. Negative commissions are then calculated and paid over those negative transactions. There are many benefits to this approach:
  • It makes claw backs very simple to implement
  • It does not require you to update the original transaction to indicate cancellation
  • It allows you to assign negative attainment to your reps
  • It treats cancellations the same way as refunds
  • It keeps revenue reporting balanced and coherent
  • It lets you handle partial refunds / partial cancellations
  • It ensures proper tracking of all sales events



The only reason NOT to use this approach is because negative commissions may not match previously paid ones. Suppose that, for the period associated with a positive transaction, a rep received a 15% commission (because above quota at this time). However, for the period associated with the negative transaction, they now only qualify for a 5% commission (because under quota). In this case, the calculated negative commission won't 100% offset the original positive commission amount. In the grand scheme of things, this may not be significant.

Setup A Claw Back Formula
This approach is useful if you need to claw back the exact commission amount paid previously. Here, we assume that transactions which paid commissions are updated to indicate that a claw back is required. In the example below:
  • The Date field was updated to the date of the cancellation
  • The Type field was changed from "Purchase" to "Cancelled"
  • The Total field was changed from $1149.50 to $0



We can now add a reward formula which says "when we see a status of Cancelled, lookup previous commissions paid on this transaction, and reverse them".



Obviously, it's possible to setup more complex claw back rules. For example, you could calculate a pro-rated amount (depending on time elapsed), or make other adjustments to the calculated amount. The main benefit of this approach is that you are reversing the exact commission amount paid previously. However, note that you are not assigning any negative attainment to your reps. 

Use A Claw Back Tool
This approach is useful if you need to claw back the exact original amount paid, but don't want to update transactions to indicate cancellation, or don't want to configure complex claw back formulas. Simply use our claw back tool and provide a list of transactions whose commissions should be reversed.



We will automatically find how much was paid on those transactions, and reverse their commissions. Corrections will be added as manual rewards so you can easily audit them.



In Conclusion
In this article, we described 3 ways you can implement claw backs. Sales Cookie provides the framework and tools to easily implement any of those approaches.

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