Payroll — commission schemes

A salesperson inflates commission by overstating sales, recording sales that are later reversed, or raising the commission rate applied. Commissions are paid on sales that are returned, canceled, or never collected.

Partly covered. The remaining analysis needs receivables data, which is planned.

Starter pack: Payroll review

Red flags

In the data

• Commissions out of proportion to the rep's net collected sales
• Commissions not reversed when the underlying sales are credited
• Sales spikes at the commission period end followed by credits
• Discounts and allowances concentrated with one rep

Behavioral

• Rep resists credit or collection reviews of their customers
• Rep handles customer disputes personally

Internal controls

• Commissions calculated on gross rather than net collected sales
• No clawback for returns or uncollected sales
• Commission rates not reconciled to approved plans