A Chat About the Benefits of Integrating Sales Commissions with Finance Ops
Hi Chris, tell us more about yourself and the SaaSOptics platform, how has SaaSOptics evolved over the years?
I have an extensive background in finance and accounting. This allowed me to really live day-in and day-out the pain points that SaaS finance professionals encounter, especially around sales commissions, revenue recognition, and pre-paid expense recognition. In fact, in my prior role before joining SaaSOptics, I helped lead the overhaul and transformation of our financial operations with SaaSOptics as the backbone. After working hands-on in the software, it didn’t take long to realize that not only did it make my job as a finance professional significantly easier, but it also had a positive impact on our customers. Having SaaSOptics in place enabled us to streamline the end-user experience for them and provided a single source of truth for their contract and invoicing details. SaaSOptics quickly became a product that I believed in and wanted to be involved with in any possible capacity, which is how I ultimately found myself on the SaaSOptics team.
The SaaSOptics platform itself really has evolved over the years to help solve the pain points a scaling SaaS finance team typically encounters. It automates financial operations and enables businesses to pull accurate SaaS metrics and analytics quickly, scale subscription billing and payments smoothly, and automate GAAP/IFRS-compliant revenue recognition. The logical next step for the platform was to introduce an Expense Recognition solution which we did in July 2021. It solved a big problem for finance teams of our customers, because Expense Recognition was historically done in spreadsheets which are error-prone, time-consuming, and disconnected from your revenue data. For most scaling SaaS and subscription based business sales commissions is the most complicated expense type to handle.
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We’d love to hear about SaaSOptics’ recent partnership with QuotaPath and how that can benefit sales teams?
QuotaPath, a commission tracking platform that is revolutionizing compensation management, is purpose-built for sales teams. It makes designing compensation plans easy and accessible. QuotaPath also provides full transparency into attained and forecasted earnings. This is both a motivator for sales teams and a huge time saver for the finance team because there’s no more revolving door of compensation questions.
Even with all the automation surrounding compensation management, commission plans get tricky when you delay payment until an invoice is sent or payment is received from a customer. Even with a commission solution like QuotaPath, your finance teams are left holding the bag since they are the only team who can see both sides needed for the payment of commissions. It really doesn’t make sense anymore for sales commissions to be completely separate from the finance systems though. They need to be interconnected because they’re so important to each other. For example, if a new customer cancels, both the finance team and sales team need to know how that will impact the payment of commissions.
Not long after SaaSOptics launched Expense Recognition, we quickly realized an opportunity to make the product even better by introducing further automation: commission calculation. A huge component of Expense Recognition for your SaaS company is commission expense and really making sure that the amortization period for those commission expenses line up with the sales contracts and ASC-606 requirements. Rather than reinvent the wheel, we partnered with QuotaPath because they do a phenomenal job of making it very easy to calculate your commissions, audit your commissions, and ensure accuracy with a rep centric approach to their design and ease of use of the application. It’s the first commission automation solution I’ve seen where the sales team finds it both intuitive and accurate.
Why is it crucial for sales teams today to have a better sales commission calculation tool in place?
By leveraging a commission calculation platform, like QuotaPath, you’re able to offer flexible compensation plans and get robust analytics. This enables your finance team to create commission plans that are attractive to top sales talent while also maintaining healthy margins. Your finance team can spend more time on strategic initiatives and less time figuring out what your sales representatives need to be paid.
This capability is absolutely critical in today’s job market because attracting top sales talent is more challenging than ever. In order to stay competitive, companies need to offer attractive compensation plans with accelerators, bonuses and spiffs. When your finance team is managing this out of a spreadsheet, they’re forced to make a tradeoff between a competitive compensation plan or one that’s easy to account for and profitable for the company.
Can you share a few thoughts on the growing use of sales commission software in the market today?
Commission calculation and accounting software has seen a meteoric rise over the past year. I attribute the growth to a couple of key factors. First, with the new regulations coming out of ASC-606, it is now required that companies amortize and recognize their sales commissions just like the revenue side of the business. At the same time, sales plans are growing increasingly complex in order to attract the top talent while also maintaining healthy margins for the company.
Because of these reasons, having your sales commission solution integrated into your financial operations system is very important. It allows for the amortization of the expenses, the release of the commission payment on the payment date, and visibility into customer cancellations and more. In addition, if the payment of commissions at your company is based on an invoicing schedule, having your solutions integrated provides your sales rep with full visibility into when those invoices are scheduled with the new customers, which in turn lets them know when they’re going to receive their commissions.
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A few thoughts on the future of these technologies and how they will grow to be part of sales tools and salestech?
There is an immense opportunity to improve the handoff from sales to finance and introduce automation that will save both of these teams time. Right now, it can almost feel like they are working against each other, because traditionally you’ve had independent systems. There’s a system that manages your commissions and then a system that manages your financials and subscription management. Going forward, those systems will need to be tightly integrated and solve the needs of both your finance and sales stakeholders.
At SaaSOptics, we see the opportunity to refine this process and make sales, finance, and accounting teams’ lives easier. So ideally, you will have a system in place so that when a sales rep closes a deal, they’re able to see what their accrued commission amount might be, run projections, see where they’re at to-quota, and ultimately determine what that could mean from an earnings perspective. At the same time, that sales order is flowing into your subscription management and financial solution, along with the accrual of the commissions. This will provide your sales team the ability to project when that commission payment will be released if it’s tied to the payment of the invoice, and it will allow the finance team to pull in the accrual amount of the commissions and create the expense revenue directly compared to the Expense Recognition schedule.
Looking even farther down the road though, consider how powerful it would be for a sales rep to have the ability to clearly see how successful the customers they close are to the business. As a sales rep, it would be very valuable to understand for example, how all the deals closed in 2020 performed in 2021. Did they all churn out over the last year? Or perhaps all of those deals closed in 2020 were worth one million dollars to the business, but in the following year they expanded and now are worth 2 million dollars to the business. Having that level of visibility is where I see technologies like this heading and where they need to be heading. Sales still operates from a commissions perspective very much like a perpetual business. As tools like your commission solution are integrated into your financial operations system, however, this mindset will morph more and more into incentivizing the sales team on the successful outcome of the business, which is the lifetime value of the customers they’re booking.
What are a few martech and salestech predictions for the new year that you’d like to highlight?
Historically, the sales commissions space has largely been focused on the largest buyer persona for commission software – often the finance team or revenue operations. QuotaPath took a bottom-up approach and prioritized the needs of the sales team first and the key to long-term adoption is a platform your sales team will love. As I’ve already touched on, a big trend I expect to see continue throughout 2022 is a deeper integration between sales and finance systems. Think about your CRMs, your commissions calculators, or your billing and financial operations software. SaaS ecosystems are becoming increasingly interconnected while also allowing users to operate in their preferred application. This allows you to create a tech stack of best in class applications that meet your company’s specific needs, rather than an all-in-one suite of products that might not go as deep in functionality as you’d like.
Once you have this integration between the sales and finance systems, it’s going to enable companies to place a greater emphasis both in how they benchmark and judge its sales team and how it aligns sales commission plans to incentivize sales by signing customers who are truly a good fit. At the end of the day, that’s really what you’re intending to do with commission plans – incentivize and align your sales team’s behaviors to the business priorities. In a subscription business model, the goal is very much around retention numbers and creating and closing business that will continue to grow. Currently, this is very rarely a component of sales performance. The focus instead is on how much you performed against quota and how much business you closed rather than the quality of the business that you closed. In the very near future, emphasizing quality over quantity is a trend I see more and more SaaS subscription businesses moving towards.
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SaaSOptics is a subscription management platform that automates financial operations for growing B2B SaaS businesses. A cloud-based solution, the SaaSOptics platform allows businesses to pull accurate SaaS metrics and analytics quickly, scale billing and payments smoothly and automate GAAP/IFRS-compliant revenue recognition. Businesses built on SaaSOptics eliminate their risky dependency on spreadsheets and streamline financial operations. SaaSOptics is easy to use, trusted by investors, within reach for early-stage startups and provides a streamlined implementation process. SaaSOptics serves over 900 customers worldwide and manages $8 billion in revenue.
Chris Weber is the COO and President at SaaSOptics
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