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Why do spreadsheets for calculating incentives miss the mark

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You must have heard this many times before, but it’s worth mentioning it again.

Excel Spreadsheets were never designed to calculate incentives; they were designed to automate simple mathematical calculations. Here’s why spreadsheets for calculating incentives miss the mark. 

Excel has ruled the spreadsheet market since the 1990s and remains a powerful tool for data analysis. Excel is superb because it:

  • Is adaptable
  • Simplifies data collection
  • Let’s you summarize & visualize the data
  • Enables logic building through formulas 
  • Is used universally and hence easy to adopt 

According to statistics, 88% of all spreadsheets contain one or more severe errors. Let me remind you about How The London Whale Debacle Is Partly The Result Of An Error,” when JP Morgan suffered a $6 billion trading loss due to nothing more than an Excel error?

You all know when you try to put a square peg in a round hole. You can relate this with Excel spreadsheets and incentive calculations.

Let’s discuss more in detail why an excel spreadsheet and incentives can never have a long-term relationship.

  1. Time-consuming – In this digital era, all the data calculations in the excel spreadsheet are done manually, which is tedious, & time-consuming. You copy-paste the data you need to calculate, which results in another manual process. It is possible with little effort for a few reps, but as the number increases, it becomes tedious to calculate these incentives and consumes our time.

  2. Human error – The reason we can’t connect the excel spreadsheet and incentive calculation is because excel only handles mathematical calculations, and not logic. The exact opposite is true for incentive calculations. It is more logical and less mathematical. This is where we need business analysts to calculate incentives. If we get an error, the analyst can easily enter the logical process and calculate the incentives, potentially of your sales reps.

  3. Lack of data errors – Unless someone manually updates the data on excel sheets every minute, otherwise the data becomes outdated. Because Excel sheets are not linked to live CRMs and ERPs, they cannot be updated in real-time. As a result, data transparency and visibility are non-existent.

  4. Not built for scale – According to experts, Excel is a functional mathematics language. Despite the fact that Excel combines data analysis, visualization, and programming, it works best when the data is small and limited to hundreds of records. It can be entered manually or copy-pasted, but the logic is more mathematical than complex.

  5. Lack of audit history – Excel never provides history of every change made to the individual cells, and you cannot see who made the changes or if they had permission to do so. You also lack the ability to create a sequence of permissions. Despite Google Sheets’ efforts to address these issues, it is impossible to check the history of changes for individual cells. Even the minutest of errors may lead to a significant monetary impact without being able to identify the root cause or the real culprit. This may held liable to be sued by the impacted individual or entity

  6. Expensive – When you use Excel for incentive calculations, you invest significant resources, including technology, human resources, and time, all of which have a cost. Given that 88% of spreadsheets contain errors, every time you encounter an error, you incur the cost of all of these resources once more, making it uneconomical at all levels and shattering the balance. Well, you may also account for the intangible monetary loss that went unidentified and may range from 5% to 8% of your annual incentive spend

  7. Not Shareable – Isn’t Excel simple to share? When you can simply send it as an attachment to an email. Maybe it is. But not when you have a large team of thousands of employees all requesting access to the same file. This is where Excel fails. You can make an Excel incentive spreadsheet for your company, but what if you want to share it with 10000+ sales representatives? Assume those reps are divided into 15 different incentive plans. You can create an Excel spreadsheet, but you can’t divide and share it so that users only see the information they need to see. This is precisely what makes it is more difficult.

  8. Limited reporting – Excel is a business tool designed for mathematical calculations with a straightforward input, process, and output mechanism. It does not allow you to configure tax implications, let alone by slabs or geographies, and it separates financial reporting and legal compliance from incentive calculation and payouts.

  9. Cannot automate payouts – Excel is a calculation tool that can assist you in calculating the final incentive. It cannot go any further than that. It separates incentive calculation from incentive payouts. To process payouts, you must manually release payments through the bank transfer, which leaves plenty of errors. Excel does not support connecting to APIs or payment gateways to process payments.

  10. Not built for incentives – It’s all well and good as long as your incentives remain simple, but they won’t be for long. With the addition of different factors, it will become more complicated. So you cannot manage all the factors while calculating incentives on excel spreadsheets.

Final Thoughts –

Spreadsheets may be useful in the early days of your company, but they are not a long-term solution for calculating incentives. To handle complex incentive plans, you’ll need something more, such as sales incentive commission software. 

Calculate your sales incentives over a coffee break! by using Aurochs Incentive Compensation Solution

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