Commission Incomes

My income is commission based and is calculated as a % on turnover sales. How can automatically calculate my commission on a sales invoice? In other words, how can I add a column on the sales invoice in which I can put in the % amount and have it calculate automatically on the invoice value.

The ability to perform calculations like you describe is not available. I’m curious, however, why you would invoice a customer for a commission.

Internally, a commission is paid by a business to its employee. Customers are not involved. Externally, if you are being compensated as a sales representative for a supplier’s products or services, you should not be invoicing the supplier for the sale, only for the commission. In that case, it should appear as a line item on the sales invoice.

Likewise, if you buy the product or service from a supplier and resell it, the purchase belongs on a purchase invoice. Only the commission portion belongs on a sales invoice.

If none of these situations applies, can you describe your situation in more detail?

Hi @Tut,

I am in the similar situation. We are a small firm that works on a commission. Let’s say Supplier A manufacture X and customer B needs X to produce finished product. We sell the X to customer B and many others without holding the actual inventory of X ourselves, we get commission from supplier A for each sale we make. Goods are delivered by the supplier to customers directly.

So, I am little confused what will be the best practice in Manager for setting up our business in Manager. I am trying to use Non-Inventory Item to record sale price for all the items we sell but then I am not sure how will I be billing supplier for all the commission he owns me for the sale we made.

You are going to have to provide more information, @wahab. Do you buy X from A and get invoiced for it? Does A then only drop-ship on your behalf? Do you every actually take ownership of X? Or are you acting as a sales representative? Who invoices the end customer for X? Etc.

The answer I gave to @Fremb 7 months ago covers some of these options. They are all fairly straightforward. But your use case is not clear.

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@Tut No we don’t buy X from A, Consider that more of sales rep situation Customer B directly pays to A and A ship goods to B but the sale price that company A has given us has the commission on it so we do have sort of cost price (which is without commission) and sale price (which includes commission). B pays directly to A for that sale price that we set and then A sends us the commission. We want to record how much A owe us for each sale we make for the product X made by Company A.

Under these circumstances, the only accounting transaction for you to enter is a sales invoice listing the commission amount that A owes you, calculated from the price of the order by B. When A pays you, Receive Money against that sales invoice.

If you want, you can set up non-inventory items with pre-calculated commission amounts for things you sell often on behalf of A and other suppliers.

Since you never own or hold the actual goods, you should not involve the inventory module in any way in such transactions. You won’t need that module unless you also have other inventory that you do own.

Is the customer responsible for paying you the commission?
If your answer is yes then try this

  1. Create a custom tax code (sey workmanship) set to your commission %
  2. Create an income account (sey commission received)
  3. When creating any invoice set the item tax to workmanship
  4. After you received payment for your in voice do a transfer from workmanship tax account to the commission received account. This can be done on periodic bases.
    Hope this help you a little

I have more or less the same situation with various customers. Unfortunately, Manager does not provide the ability to calculate this kind of transactions automatically. You could, however, use the Billable Expenses Module for this transactions. It’s really easy to use but it will not calculate your commissions automatically. The upside of this module is that it creates a “Billable Expenses” account in your Balance Sheet so all product you will put in this account you can link it with a specify Client and Invoice, and it will not enter to your Profit and Loss Statement. However, you will have to create a new line in the Invoice for the Commission and this account will show as an income account.

This module works perfectly but if you need to report those sales as part of your income then I would not recommend you to use it. This is where I get a little lost. In my case, my client paid services, supplies, etc. for activities that later will Invoice to his clients. With the supplies and others I have no doubts but with the services paid is when I get trouble because we have to report any services paid to the suppliers at the end of the year. So, if I don’t report this as an expense then the forms will not match with the Profit and Loss and it could lead to an investigation because, how would you report services you paid but have no “Professional Services” as an expense in your books? This case is a little more complicated than yours, maybe, but I did the following:

  1. Create a “Billable Expense” as an income account.
  2. Create a “Commissions Income” as an income account.
  3. Create a “Billable Expense” as a cost of revenues account.
  4. Create a “Subcontracted Services” as a cost of revenues account.

Now, this accounts can allow me to visualize my real scenario without using the “Billable Expenses” module. You will have your “Sales” on your Income (Billable Expenses or whatever name you want to give it), the costs of those sales that I would assume is the same as the “Sales Account”, your commissions in your income account and finally, the “Subcontracted services” as a part of your cost of revenues. This will give you a “Gross Profit” before all the other expenses and that should be your real income for the period. I do this because, like I said, I must report all services and fill a sales tax return every month and others, but if you don’t need to report all your billable expenses, then you should use the billable expense module because, honestly, is a lot more easy than my method.

I hope this could help.

@Citusgler, I think your idea of using tax codes for commission calculation is a poor one. Taxes calculated via a tax code are linked with an automatic control account and several reports. This approach will pretty seriously compromise your records.

@sulfuror, your idea of using billable expenses for commission is also poor. Billable expenses are designed to record purchases you make on behalf of a customer, for which you will be reimbursed by the customer. Billable expenses do not appear on your profit and loss statement. So supplies for a repair job, air fare for a customer visit, and so on are billable expenses. A commission is income or an expense, depending on whether you are earning it or paying it to someone. But it is not a billable expenses as Manager uses that terminology.

I think Lubo will have to take an urgent look at including commission service charge as income. Also, needed is commission paid to sales reps on sales invoice.

@Tut technically, you are correct. Those ideas are poor. I don’t see why you have to invoice a customer for a commission neither but there are some type of businesses that work that way. In theory they don’t have to invoice a customer in the first place but in the real practice when you work as a subcontract service to provide, let’s say events, or you’re the man in the middle of a sale transactions but as an entirely different entity (not as an employee), then your customers want to have their invoices with the correct prices that they’re “reimbursing” you and the commission fee. This is something that I have debated with various customers because this type of businesses, they must be treated as sales; period. You invoice the total and then paid your supplier even when you don’t really receive an inventory. You’ll have your “gross profit” and that is your gain or your “commission”. But this doesn’t work for people in this kind of businesses because they know that they’re not selling anything, they work for commissions and in the daily basis of their businesses, they do not work with inventory or even shipping the thing that they’re “selling”. That’s why sometimes is hard to understand and mostly, to put in practice in your accounting and accounting system this type of transactions.

For the kind of situation you describe, the invoice is merely for the service of selling an item. It should be invoiced that way. Inventory doesn’t enter the process. You might have to append other documents showing what inventory belonging to the ultimate customer was sold on their behalf. But that was never your inventory to sell.

@Tut and @sulfuror
I still believe the developers will have to reconsider this request. I provide IT services to a business sector where they charge for their service on percentage commission based on the total cost of materials. in the preparation of their invoice they system need to calculate the total cost of materials and then charge percentage of it as service (installation) charge for income. This is not possible in Manager so I have to create a tax code to do that and then do a journal entry every time to transfer the amount into a corresponding income account. This i know is not right but there is nothing I can do about.
one thing we must consider here is that customers are looking at have one invoice per transaction.

You are correct. Using a tax code to calculate a commission is a very poor idea and is going to corrupt all your tax calculations. You will never get such a practice accepted by an auditor. Manager simply does not support the type of calculations you and the original poster describe. Unless that changes, you need another method for calculating the commission. There are often many, complex steps to documenting amounts invoiced to customers. No accounting system can do all our work for us.

That is assuming that “normal” tax codes are also being used - tax on top of the commission code.
Otherwise, if its a stand alone “tax” code then there are no implications and an apt solution.

Depending on the volume you could consider a daily / weekly / monthly Journal rather then one per transaction.