Done by Spreadsheet: Manual Commission Processes Are a Governance Risk

Sales compensation used to be an operations-focused payout execution function. Today, it’s a strategic revenue lever. Unfortunately, spreadsheets, email approvals, and offline scorekeepers are still commonplace for commission calculations and payouts. What was once considered acceptable for smaller teams has become a dangerous revenue governance risk.

Manual commission administration leads to compliance gaps, financial exposure, productivity delays, and seller mistrust. Without robust commission governance, your incentive plans will fall short on complexity and conscious evolution from spreadsheet programs to automated systems is required.

Why Spreadsheets Make You Vulnerable 

Before we talk about risks, it’s important to recognize why spreadsheets are so deeply ingrained in commission processes.

Sales commissions are typically governed by spreadsheets because they:

1. Are quick to implement
2. Don’t require initial investment
3. Allow flexible calculation creation
4. Can be managed without IT resources 

As long as an organization has a basic commission plan (flat percentages, straightforward territory structures, and linear revenue cycles), spreadsheets work fine.

Grow beyond that basics, though, and you introduce:

a. Commission overrides
b. Cross-sell incentives
c. Volume accelerators
d. Margin layering
e. Account-specific thresholds 

Complex payouts that require detailed administration and visibility. Here’s where spreadsheets start to expose organizations to serious governance risks.

5 Ways Manual Processes Undermine Governance 

1. Nobody Escapes the “Garbage In = Garbage Out” Phenomenon

First-party commission spreadsheets pull in data from a variety of sources:

a. CRM platform exports
b. Billing platforms/ERP systems
c. Headcount reports from HR
d. Territory definitions 

The list goes on. Anytime data is transferred from system to spreadsheet (or human to spreadsheet) opportunity for human error is introduced.

Scenario: Incorrect territory definitions lead to 7% commission overpayments. The error wasn’t caught until finance did year-end audit reconciliations.

Copy-Paste Risks: 

a.  Incorrect file versions being used
b.  Loss of transactions (e.g., during transfer process)
c.  Duplicates carried over
d. Referenced files not updating (e.g., HR headcount) 

The issue here isn’t necessarily human error. Finance and compensation teams manually generating commission payouts are left with little option for data validation if commission data isn’t automated.

2. No Trail? Now You Have a Compliance Risk 

Governance includes documentation and visibility into the decision-making process. Questions like: 

a. Who updated the plan rule?
b. When was the update approved?
c. Which seller payouts were affected?
d. Were there any exceptions? 

A spreadsheet doesn’t offer reliable auditability. Most commission files are shared → emailed to stakeholders → updated and shared again.

Scenario: A sales rep notices his quarterly payout is less than expected. Audit trail reveals middle manager overrode commission percentage in Excel to “reward” another seller. Manual override went undocumented, leading to internal controls and SOX compliance issues.

Point solution files can create who knows what kind of accountability issues. No Excel Approvals. 

3. Exceptions Will Drive You Insane 

Exceptions come in many forms: 

a. Credit assignments
b. Split deals
c. Price protection approvals
d. Mid-quarter promotions 

All of the above need decision-making around payouts, which is manually logged in spreadsheets via…

a. Email conversations
b. Independent “cheat sheets”
d. Manual exception tracker 

You get the idea. Examples of exceptions getting out of control: 

Scenario: A major retailer had 423 exception payouts in one quarter. 27% of these exceptions were not properly approved due to lack of robust governance — causing cost of sales to bleed and finance escalations.

Without robust, centralized workflows to manage exceptions, your compensation team is left with rogue payouts that “can’t be helped” because they don’t have anything else.

4.Seller Pushback Becomes Normal 

Transparency is key to optimizing seller performance. 

When commission statements are manually generated, there’s no:

a. Visibility on real-time deal attainment
b. Ability to view deal-level payouts
c. Explanation for adjustments (even if there are none)
d. Pushback from sellers is inevitable. 

Scenario: Every quarter, an SaaS company’s sales reps question 18% of their payouts. After digging into complaints, the compensation team discovered delayed updates to the spreadsheet and rounding errors in manual calculations.

When sellers don’t trust their payout process, it shows in their performance. Instead of fostering sustainable growth, sales leaders are left scrambling to dial up revenue targets (and incur more comp spend) to happy unhealthy sellers.

5.Finance Loses Sleep over Accrual Estimates 

If you’re not automating commission payouts, finance will have a field day…with anxiety.

Finance teams are tasked with accurately accruing commissions. When sellers are paid via spreadsheet, finance has to forecast commission payouts (essentially guessing in some cases) and audit the hell out of commission plans.

Examples of manual “true ups:” 

Our bank swallowed a $450k commission accrual “mistake”. The error was traced back to a manual Excel tracker not accounting for a new incentive plan kicker late in Q2.

$2.3M commission “true up” caused because of late triggered accelerators not caught in manual commission tracking spreadsheet.

When sales commissions aren’t standardized and governed, Finance does what they do best: Lose sleep.

Governance Degradation at Scale 

All of these examples apply to companies who manage multiple plans across regions, sellers’ teams, and business units. As growth occurs, spreadsheet commission processes typically cannot handle the exponential growth in:

a. Geographies plus languages
b. Currency fluctuations
c. Role configurations
d. Plan variation
e. Rules and exceptions
f. Data sources 

Leading to “everyone does their own version” of commission plans.

Instead of an optimal commission plan framework supported by a centralized source of record, you’ll find:

a. Dozens of calculation worksheets
b. Multiple owners for compensation logic
c. Files everywhere (and nobody knows where)
d. When governance is delegated to a filetype, it’ll quickly deteriorate.

3 Steps to Strategic Commission Governance 

The fact of the matter is spreadsheets were never built to house complex commission plans let alone control and manage them. So what’s the answer? 

1. Automate the Way You Credit and Calculate

Technology makes it possible to create rule-based credit assignments, track sales deal attainment in real time, and create “what-if” scenario planning. Using spreadsheets for calculating payouts is irresponsible. 

Pushing commission data through automated calculations eliminates human error and allows for proper validation to take place.

2. Embed Governance into Your Commission Process 

Sell-in versus sell-out arguments aside, good compensation technology embeds governance into the process by forcing users to:

a. Define approval hierarchy/structure
b. Standardize exception handling
c. Maintain policy versioning
d. Metadata everything. 

No more hiding governance in emails it’s built right into the technology.

3. Measure Financial Impact plus Seller Behaviour 

Compensation technology should allow you to analyze: 

a. Payout vs. revenue performance
b. Overall cost of your plans
c. Distribution of payout vs. plan design
d. Effective of incentives to drive seller behaviour 

Rather than blindly paying out commissions, you can evaluate your plans to determine where you can optimize incentives to drive revenue.

The Governance Opportunity 

The reward for properly managing your sales commissions goes beyond simple “low hanging fruit” savings.

Stop treating commissions like a necessary evil. With proper governance and automation in place, commissions can be used as a strategic lever to drive predictable revenue growth.

Earned revenue acceleration doesn’t just happen it’s incentivized.

Call to Action 

Take a look at your commission plans. Where do you see risk arising from manual processes? How can you start shifting your focus from spending money on commissions to using commissions to spend money?