Recoverable vs Non-Recoverable Draw: What is the Difference?

As discussed in our previous blog post, a draw (draw against commission) is when a business owner advances a predetermined amount to a salesperson against future sales commissions. Any sales commission earned in excess of the advanced amount is normally for the salesperson to keep, but there are other plans or agreements in place depending on the agreement between the business and the salespersons.

Recoverable Draw vs Non-Recoverable Draw

There are typically two types of Draws. One is Recoverable and the other is Non-Recoverable. A Recoverable Draw is like an interest-free loan that the salesperson can pay back to the company after they earn enough in sales commissions.

Example: The business sets a recoverable draw amount of $1000 for Agent X per commission period. Agent X earns $1000 and decides to also take the full recoverable draw amount of $1000 to get a total of $2000 in compensation payment.

If Agent X earns $3000 in commissions the following month, he’ll need to repay the $1000, so he’ll only be able to take home $2000 in compensation payment for that commission period. A Non-Recoverable Draw, on the other hand, is quite similar to a guaranteed base pay. It is an “advance” payment to the salesperson which the company can no longer recover.

Example: The business sets a non-recoverable draw amount of $2000 for Agent X per commission period. If Agent X only earns $1000 in sales commissions for a commission period, he will still get $2000.

But if Agent X earns $4000 in sales commissions during the following month, he will get the full $4000 and nothing from the draw amount.

Processing Recoverable and Non-Recoverable Draws

If a sales compensation plan involves many different rules and Recoverable and Non-Recoverable Draws are also involved, it can create a rather complex sales compensation plan. Manually processing complex sales compensation plans every pay period can be time consuming, difficult, and often confusing - which makes it highly prone to errors. There is a handful of sales commission automation tools in the market today, but only one has proven time and again that it is able to handle complex compensation plans - including Recoverable and Non-Recoverable Draws.

“QCommission has been a great tool for us in making sure our employees are paid accurately given that our commission calculation is quite complex. [SENSITIVE CONTENT] and her team have also been a wonderful partner to us. They are always ready to help and available when issues come up. It is easy to use, flexible in a sense that you can run it for the whole population or just for specific individuals, can handle complex calculations and can integrate from other 3rd party systems to pull data for calculations. Interface is also straightforward.” - Jenalyn B., Asst. Manager, Payroll, Automotive Industry (Review Source: Capterra)

QCommission, one of the best and most powerful sales commission automation solutions in the market today, has over 20 vertical-specific templates, more than 40 direct integrations with the most popular CRM and finance systems, and at least 150 available reports and analytics. Interested in automating and simplifying your sales commission process? Fill out the Demo Inquiry form today (right side of your screen) for a quick needs analysis and personalized demo.