Request demo

Why should you stop using Excel Spreadsheets for Sales Compensation Data?

10 minutes read

Did you know that 80% of spreadsheets contain at least one error?

Excel is one of the popular, well-known, and powerful tools of this era. Millions of business and business professionals across the world, today, use excel to collect, calculate and track data. But it was never designed to meet all of your business needs. And it certainly isn’t the best choice for tracking or processing sales commissions for your sales team.

Because processing commissions isn’t just math. It’s a process in which you want to

  • Ensure accuracy
  • Identify missed commission payments
  • Communicate accuracy to your sales reps
  • And analyze the overall sales performance of your team.

Let’s now discuss the downfalls of processing commissions using Excel


1. Excel spreadsheets do not connect with your internal data sources

Data processing in Excel typically requires you to

  • Manually collect the data
  • And then manipulate it using specific formulas

But processing the sales compensation data is not so simple and straightforward. Because for commissioning, you often need access to data objects directly from their CRM, ERP, and Payroll systems.

So, how easy is it to pull data from these systems into a central spreadsheet, manipulate that data, and keep it updated in real-time? This is close to impossible

Ideally here, we want the data from multiple sources to be pulled in automatically to a central location and allow us to manipulate it the way we want. Unfortunately, currently, Excel doesn’t have such functionality. Despite awesome efforts by Microsoft to make Excel (and Excel Online) more connected, it’s still not a connected system.


2. Excel spreadsheets are manual and eat a lot of time

There is no doubt that Excel spreadsheets are a fine art when it comes to handling calculations.

  • You drop in some numbers into the cells
  • Create formulas that you need (to calculate commissions)
  • Attach those formulas to specific cells
  • And it tells you the answer (the commission earned)

While all this sounds good, this is feasible only on a small scale. But when you grow both in terms of sales staff and the number of products you sell, it becomes very obvious, very fast that there is a ton of manual and time-consuming effort involved.

Creating and running spreadsheets takes up way too many hours or even weeks, every quarter, that could be spent on more pressing tasks like growing revenue.

When you use spreadsheets for commissioning your options are to either

  • Have someone dedicated to entering numbers all the time
  • Or have someone on your staff stop doing something that is more valuable, in order to enter the data

However you look at it, it’s not the best use of your company’s resources.


3. Excel spreadsheets leave too much room for human error

It’s not just the heavy time commitment that makes spreadsheets less than ideal for running sales compensation plans. Another major problem with excel spreadsheets is that they are highly error-prone as they rely on people manually entering and editing data. This can lead to some pretty costly mistakes if they’re not caught in time.

Studies have found that close to 80% of business spreadsheets contain at least one error. Now, one error might not seem like a huge problem, but that one error could be affecting every calculation you do inside the spreadsheet, costing you significant losses in terms of overpayments or underpayments.

Even one little figure change in a cell causes value shifts in other cells. And pretty soon, the entire spreadsheet will be compromised. This leads to

  • The finance (or whoever built the spreadsheet in the first place) regenerating it again
  • And processing the whole data again

This seemingly small setback adds to the backlog and takes up precious time that your staff could better spend on more important things.

Therefore spreadsheets just leave too much room for human error. When there is so much riding on a single document (such as your sales reps’ paycheck), making a mistake shouldn’t be so easy.


4. Excel Spreadsheets lack Transparency

Sales commission data needs to be transparent. People need to have a full understanding of the data contained in a sales compensation plan and how it’s represented. Without this transparency, figures can be doctored, and errors can be made.

Transparency allows both the payers and the payees to avoid or solve any sort of payment disputes easily and quickly. But when it comes to making all data within a spreadsheet accessible and open, spreadsheets fail to meet the mark.

The thing with spreadsheets is that we use formulas to calculate sales compensations in spreadsheets. And these formulas don’t always reveal what’s behind them.

Like,

  • How were these formulas developed?
  • What factors does this sales compensation plan take into account
  • What does it leave out?

All this can be difficult to figure out if you’re not the person who set them up.

This is one of those things that people don’t often think about until the person who designed the spreadsheet leaves the company and someone else has to take over.

Then suddenly that someone else has to figure out where the equations came from or why equations are set up the way that they are. Even a standard equation might have required some customization at some point to better reflect your compensation program.


5. Excel Spreadsheets are inflexible

Spreadsheets are very rigid creations. They can only do what you tell them to do.

This means that they’re great if nothing in your business ever changes. But let’s be honest, that rarely is the case. How often does nothing ever change in your business?

Everything from different commission rates on different products to limited time spiffs have to be accounted for in a sales commission program.

And often, a revenue leader may wish to make changes to a plan mid-flow, or make short-term modifications to a previously signed-off plan.

If you’re using a spreadsheet, everything has to be adjusted manually each time something changes. They just don’t offer the power or flexibility to make subtle changes quickly and on the fly. This adds to the workload of whoever is in charge of calculating and managing commissions.


6. Security is often an afterthought with Excel Spreadsheets

Spreadsheets are a huge security risk. The rows upon rows of the sensitive client, HR, and payment data that a sales compensation plan contains are extremely vulnerable to theft and hacking.

Here are two possible kinds of thefts that may happen:

  • Digital Theft: The most obvious threat posed by spreadsheets is that they are shared almost exclusively via email. And every email an employee sends with the sales compensation plan attached to it is vulnerable to hacking.

    Consider this scenario: a revenue leader attaches a sales compensation plan as a file to an email and sends it to the sales rep for review.

    But the recipient’s email account, unbeknownst to them, has been compromised by a hacker, who sees the message and downloads the attachment. That hacker now has access to private information about your company and your sales reps.

    No matter how robust your company’s security system is, hackers can always find a way in. It’s not safe to share sensitive financial data through email.

  • Physical Theft: Another security risk is imminent when employees might print out the spreadsheets (for their convenience) and leave them lying around. Anyone could walk into your office and see the sales compensation plan on their desk.

Spreadsheets are a security risk, whether they are shared digitally or physically. Imagine if your company or employee’s financial information was compromised merely because of carelessness with exposing spreadsheets. The risk and the stress are simply not worth it.


7. Audit trails in Excel Spreadsheets are Ineffective

When you want to quickly pull up a past payment that was made, there is actually no great way to do it in Excel. You might be thinking of the VLOOKUP functionality in Excel for this. But let’s be honest, it’s again a manual process and prone to human error.

Here are some issues that you might face when you use VLOOKUP:

  • You’ll have to know the formula syntax to use it properly (a confusing demand for novice users)
  • If you add data to the table you're referencing, it can break your VLOOKUP formula unless you used relative ranges (as opposed to absolute)
  • If you add additional data to the main table (that contains the VLOOKUP formula itself) you need to remember to manually fill the empty cell with the VLOOKUP formula itself
  • VLOOKUPs are set at the individual cell and are only meant for static data

Spreadsheets are a security risk, whether they are shared digitally or physically. Imagine if your company or employee’s financial information was compromised merely because of carelessness with exposing spreadsheets. The risk and the stress are simply not worth it.


8. Forget sales compensation analysis or running “What if” Scenarios

While the purpose of processing commissions is to make sure that you pay your employees fairly and accurately, your sales management should also be able to analyze data and draw conclusions from it.

Like,

  • How many employees have exceeded their quota this quarter and earned the highest amount of commission?
  • What kind of compensation has motivated your employees the most in the past?
  • Is everyone in your sales team getting to earn some or the other incentive?

This kind of performance analysis is very important in any business. After all, you have to at least know where you’re heading right?

But it becomes very difficult and time-consuming to analyze this in Excel. And whatever little analysis that you manage to do also doesn’t give you the complete picture

Another important analysis is understanding the potential outcomes of your compensation plans according to varying scenarios so that you can model your future compensation plans accordingly.

Uncertain times (just like the last couple of years) make this kind of analysis a necessity these days rather than just a nice to have. In a climate of uncertainty, the power to understand potential compensation outcomes according to changing circumstances is a must for smart revenue leaders. Wouldn’t it be great to compare different compensation models at different achievement rates?

But this kind of analysis is tricky to do in excel spreadsheets. Sure it’s possible, but the amount of manual heavy work means it’s often just not worth the time and effort.


9. In a mobile-first world, spreadsheets simply don’t cut it

In Excel spreadsheets, it’s impossible to show more than a few columns of data legibly on mobile. Zooming and endless scrolling are the frustrating reality of viewing spreadsheets on the go on mobile devices. There’s just too much data and not enough screen space.

While the cards view in Excel has improved things, accessing the data you need quickly and easily is still complex and time-consuming on mobile. And these days, poor access to the data they need on the move is going to hold back or frustrate your sales teams.

Conclusion: In case you are still using Excel to manage your commissions, it’s time that you rethink and make the wise decision of shifting to a sales compensation automation software.


Learn about the psychological aspects that you need to consider while developing a sales compensation plan

The Psychology behind an effective sales compensation strategy


Check out some interesting statistics about sales compensation

Statistics about the State of Sales Compensation in 2022


Learn why is it necessary to automate your sales incentive compensation

Why is it necessary to automate your sales incentive compensation?


Learn how to select a sales compensation automation software

How to Select the right Sales Compensation Automation Software?


Learn how real-time commissions improve your sales employees’ motivation and performance

How do the commissions displayed in real-time improve your sales team’s motivation and performance?


Learn how to make your sales compensation plan motivating for your managers

How to make your Sales Compensation Motivating for the Managers?


Learn how design, implement and gamify your sales incentive plan

Best Practices to Design your Sales Incentive Plan

Best practices to Implement a Sales Incentive Plan

How Gamification can help to take your Incentive Plan to a whole new level?


Published on Wed Apr 20 2022

Ready to double your sales numbers?

Schedule a demo with our team to see how SmartWinnr can drive sales productivity in your organization. Or talk to us about your challenges and if SmartWinnr can help.

Request demo Free Consultation