A draw against sales commissions is a prepayment of a sales representative’s future commissions. It is typically used to provide sales representatives with a guaranteed income during slow periods or when they are new to the company.
Draws can be either recoverable or non-recoverable. The difference is that recoverable draws must be paid back by the sales representative with future commissions, while non-recoverable draws are not.
There are several reasons why a company might choose to use a draw against sales commissions. One reason is to attract and retain top sales talent.
By providing a guaranteed income, companies can make their sales positions more attractive to potential candidates. Another reason is to help sales representatives through slow periods. When sales are slow, sales representatives may not be able to earn enough commissions to cover their living expenses. A draw can help to bridge the gap between slow periods and high-volume periods.
There are also some potential drawbacks to using a draw against sales commissions. One drawback is that it can demotivate sales representatives. If sales representatives are not able to earn enough commissions to cover their draw, they may become discouraged and less productive. Another drawback is that it can be difficult to track. It can be difficult to track the amount of commission that each sales representative earns, which can make it difficult to determine how much of a draw they should be eligible for. That’s why it’s important to enlist the help of sales and commission tracking software like QuotaPath.
Overall, the decision of whether or not to use a draw against sales commissions is a complex one. There are both pros and cons to consider, and the best decision will vary depending on the specific circumstances of your company.
Here are some important things to remember when using a draw against sales commissions:
- Set clear expectations with your sales representatives. Make sure that they understand how the draw works and what they are expected to do to earn back their draw.
- Track the amount of commission that each sales representative earns. This will help you to determine how much of a draw they should be eligible for.
- Be prepared to recover the draw if the sales representative does not earn enough commissions. This could mean deducting the draw from their future paychecks or requiring them to repay the draw in full.
By following these tips, you can help to ensure that your use of a draw against sales commissions is successful.