Forecasting sales commissions

Sales commissions can be a considerable cost to electronics manufacturers. A multinational manufacturer of networking equipment with a large international sales team needed to more accurately forecast annual sales commission payouts. The company’s compensation system includes over 100 different pay plan structures. The legacy forecasting system was largely based on single-point ‘best estimates’ by sales management that had proven over time to be inaccurate.

EpiX reviewed the client’s historical sales and commission data and showed that sales performance and commissions were considerably different between regions and countries. Based on its findings, EpiX then developed a Monte Carlo forecasting model that combined the historical data, the 100+ different pay plan structures, and the company’s current sales forecasts into a forecast of future commission liabilities, including a range and probabilities. The model also took into account actual sales performance at points within a pay cycle.

EpiX delivered the user-friendly forecasting model to the client along with a manual for using as well as potentially modifying the model. EpiX also provided online training on how to use the model, understand the results and modify the model. This enabled the client to change the model as needed when business needs shift without re-engaging EpiX Analytics.

The forecasting tool has been used successfully by the client for many years.

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