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Prorating Compensation Earnings Scenario

Although an amount may be owed to an organization, the customer may not remit the full amount in one payment. This can affect the compensation earned by the participant who booked the order. The participant's compensation can be prorated, based on the amount actually paid by the customer. If the customer does not pay the full amount, the participant does not earn full compensation.

To pay compensation on payments and prorate the payments, a compensation plan must have an earned status of Paid, and the Prorate check box must be selected. As a compensation administrator, you must keep track of when customers pay orders and how much each payment is worth. This allows the calculation engine to calculate prorated payments, based on the payments received for an order.

Summary Scenario

The following compensation scenario frequently occurs.

Glenda Durant is included in a plan that pays her 10% of each deal she closes. She does not receive compensation until the customer pays for the order, and compensation is prorated based on the customer's payment. If Durant closes a deal for $1,000,000, she is eligible to earn $100,000.

However, the customer only pays $500,000 of the $1,000,000. Based on the customer's payments, Durant earns 50% of what she is eligible to earn ($500,000 divided by 1,000,000 equals 50%; 50% multiplied by $100,000 equals $50,000). When the customer pays the additional $500,000 owed, Durant receives the remaining $50,000 in compensation.

Detailed Scenario

The following detailed scenario describes how a rule can be set up to compute prorated compensation based on payment (cash) received compared to the total order amount.

This scenario only occurs when a compensation rule has an earned status of Paid and the Prorate check box is selected. For more information, see To set up the rule to prorate payments.

Sales representative Glenda Durant, handles a new order in the following way:

  1. An order is created for Durant with a Booked status on July 1, 2003.

    2. Order 1 —Booked $6,000

  2. The order has three line items, as shown in the following table.

    3. Line #
    Product
    Status
    Order Amount
    1
    Item #1
    Booked
    $1,000
    2
    Item #2
    Booked
    $2,000
    3
    Item #3
    Booked
    $3,000

  3. The order is imported into the Transaction Workbook for compensation processing.
  4. The compensation administrator exports the order to the Calculation Workbook.
  5. The compensation administrator starts a Calculation Run.

    6. No compensation is paid because the Order status is Booked, the rule is set up with Earned status equal to Paid, and the Prorate check box is selected.

  6. Payment for the order is received and status of the order is changed to Paid on July 13, 2003.
  7. A payment record is created in the Payment view of the Invoices screen.

    8. For more information, see Creating Invoices for Orders to Be Imported.

    Payment Amount = $4,000.

  8. The compensation administrator imports both the order and the payment into the Transaction Workbook. Two new records are created in the Transaction Workbook. The first is an order record with PAID status, and the second is a payment record with the payment amount and Payment ID entered, and the Payment check box selected.

    9. The following fields in the Transaction Workbook designate a payment record:

    Payment = check box selected (read-only)

    Payment amount = $xx (editable)

    NOTE:  The order status must be Paid to import the Payment for Order record from the Invoices screen. Changing the Line Item Status to Paid does not result in payment records being imported.

  9. The compensation administrator exports the transaction to the Calculation Workbook.

    10. The Calculation engine only looks at records with the Payment check box selected, and the Payment Amount field for prorating compensation earnings.

    1. If the Transaction Level equals Transaction in the Rule

      2. Order 1: Paid (status) $6,000 (order amount)

      Payment Flag: check box selected (payment record)

      Compensation Amount = (Revenue * 10%) * Earned% * Prorate Factor

      where

      Prorate Factor = Payment Amount / Revenue

      Compensation Amount = $400

    2. If the Transaction Level equals Transaction Detail in the Rule, then the example, shown in the following table, is true.

      3. Line #
      Product
      Status
      Order Amount
      Payment Amount
      1
      Item #1
      Paid
      $1,000
      $666.67
      2
      Item #2
      Paid
      $2,000
      $1,333.33
      3
      Item #3
      Paid
      $3,000
      $2,000.00

      The example that follows shows how compensation is calculated using Line 1 - Item #1: Paid $1000, Payment = check box selected:

      Compensation Amount = (Line Revenue * 10%) * (Earned%) * Prorate Factor

      Prorate Factor = Payment Amount/Line Revenue

      Payment Amount = [(Line Revenue/Total Revenue) * Payment]

      Compensation Amount = (Line Revenue * 10%) * (Earned%) * (Line Item Payment Amount/Line Item Revenue)

      Compensation Amount = ($1000 * 10%) * (100%) * ($666.67/$1000)

      Compensation Amount - $66.67

      NOTE:  Payments are made at the order header level and applied across the lines in a weighted manner. The payment amount at the line item is prorated automatically during the Import Transaction process. The Payment Amount can be changed manually in the Transaction Workbook.


 Siebel Incentive Compensation Administration Guide 
 Published: 18 April 2003