ASC 606 is groundbreaking accounting literature. If you’re in sales operations, why should you care?
Most accounting teams are scratching their heads to figure out the revenue side of Revenue Recognition ASC 606, as the deadline for compliance is just a whisker away, falling on January 1, 2018. But what most companies are overlooking is the equally large impact on the cost side. And, as you probably know, the largest component of a company’s costs is its sales and channel commissions.
ASC 606 will affect you in these areas and more:
- Sales compensation plan design
- Use and timing of SPIFs and bonuses
- Increased reporting and forecasting of commissions spend
Don’t take comfort in your peers failing to take action on this new legislation. The legislation is extremely complicated, hard to interpret, and has undergone many iterations since it was first released; however, shutting your eyes to ASC 606 can easily escalate to clawbacks, recalculations, and mid-year plan changes. This is easily avoided and should be if you want to keep your sales reps happy and productive.
You should factor in ASC 606 as you start designing comp plans for 2018. If you don’t, your finance team will dictate what compensations plans and components you can and cannot use and when. But you don’t want comp plans that just comply with the latest accounting guidance. You want compensation plans to drive sales behaviors and help you achieve your company’s sales goals and strategic objectives.
So if you are not part of the ASC 606 conversation at your company, have a meeting with the head of your revenue accounting team. Before you have that conversation, you should know exactly how this new legislation affects sales commissions. We have you covered.
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