How to Minimize Shadow Accounting in Sales Organizations

What is Shadow Accounting?

According to untracht.com, shadow accounting generally refers to a system in which two separate sets of financial books and records are kept for the purpose of detecting mistakes and inconsistencies.

In the world of sales, shadow accounting is when sales reps keep their own set of records to track personal sales and compare to the commission statements given to them every pay period. They do this to try and make sure they are paid the right amount in commissions.

What are the Negative Effects of Shadow Accounting?

One of the biggest negative effects of Shadow Accounting is that it builds distrust.

When sales reps do not completely trust the commission statements given to them, they use up time to double check their statements versus their own records – this is time that they could’ve been using instead on more productive activities like prospecting and closing sales.

But where does distrust come from? It’s not that sales reps are naturally paranoid or distrustful in nature. It could be that they have been paid incorrectly in the past, or the commission statement does not seem to add up to how they performed in given pay period. It could have been an accumulation of negative experiences that neither the sales rep nor the sales comp manager expected.

Aside from trust issues, what is another negative effect of shadow accounting?

As mentioned above, shadow accounting takes time away from more productive activities. Shadow accounting may take anywhere from 30 minutes to an hour every day. If you have 20 sales reps, that’s 20 hours per day used on checking and double checking commission statements instead of prospecting or closing sales.

In a week, that’s easily 100 hours lost to shadow accounting. Do you really want that much unproductive hours from your sales team?

How to Avoid Shadow Accounting

There are two solutions to avoid shadow accounting. One is to find a comp plan manager who is the epitome of the word ‘perfect’. He or she is one who has 20/20 vision, never hits the wrong number on the keyboard, never accidentally types numbers in the wrong cell on a spreadsheet, never gets stressed, absolutely loves numbers, and never ever makes mistakes. Or you can opt for the more realistic solution: automation.

Benefits of Automating Your Sales Compensation

Saves Time. Instead of your sales comp manager and your sales reps spending countless hours on commission statements every pay period, automating your sales commissions can reduce the entire process to a just few minutes each pay period.

Increases Accuracy. Automating your sales commission process lessens manual inputs and helps eliminate human errors.

Happier Sales Reps. Less errors on commission statements results in happier sales reps. This also helps win back their trust. And when your sales reps don’t have to worry about receiving inaccurate commissions, they are able to use their on time more productive sales activities.

Conclusion

If your sales team is currently performing shadow accounting and are showing signs of being unhappy with their jobs, it’s high time to look at your sales commission process. It is very likely that you are still doing commissions manually and have been producing commission statements with errors.

Automating your sales commission process doesn’t have to be expensive and tedious. Contact us today. so we can help you improve your sales commission process right away.