This document discusses the importance of forecasting, budgeting, and accruing for bonuses as part of an incentive compensation plan. It notes that properly designing and managing bonus structures requires predicting future performance, revenues, and bonus payouts. It recommends using historical data and "what if" analysis to establish targets and assess plans. Finally, it emphasizes that automating these processes through an incentive compensation management system helps with strategic planning, accurate accounting, and ensuring bonuses are attainable and budgets are reliable.
Sales Compensation: Tips and Tricks to Building a Powerful PlanRingLead
We’ve all heard Tom Cruise’s famous line from Jerry Maguire, but showing your sales team members "the money" is often a complicated equation. In this webinar, you’ll learn the tactics and secrets for designing, planning and implementing powerful sales compensation packages that yield results and actually scale.
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- How to make sure your data is strong for accurate compensation, reporting and lead routing
Use benchmarking and sales analysis to assess your sales compensation plans. A comprehensive view often times yields issues beyond the sales incentive component. Learn how to apply 16 tests and develop new sales incentive ideas. A presentation by Sales Benchmark Index.
Sales Compensation: Tips and Tricks to Building a Powerful PlanRingLead
We’ve all heard Tom Cruise’s famous line from Jerry Maguire, but showing your sales team members "the money" is often a complicated equation. In this webinar, you’ll learn the tactics and secrets for designing, planning and implementing powerful sales compensation packages that yield results and actually scale.
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- How to automate the compensation process with technology
- How to make sure your data is strong for accurate compensation, reporting and lead routing
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More than 8 years of accumulated big data delivers intelligence and best practices to organizations in all sizes, industries. These are the seven practices that our data shows work against you in your quest to incent right.
Strategic Account Management Association (SAMA) Session: Case Study on Custom...Revegy, Inc.
Presentation from the 2017 SAMA (Strategic Account Management Association) Conference featuring Shawn Green, Vice President for strategic accounts for BlackLine, discussing how they leverage a best practices framework and account planning/management technology to double key account revenue.
IB Business and Management (Standard Level)
All material taken from the IB Business and Management Textbook:
"Business and Management", Paul Hoang, IBID Press, Victoria, 2007
This is meant to provide interested parties of an example of what a KAP could look like. It is subject to change and is dependent to specific requirements of companies and their reflective market places, accounts, customers, and competition. It is merely an example.
If you chose to use it, it is at your own risk of success.
Driving Performance Through Enhanced Collaboration between HR and Finance.
Effective working relationships across functions — particularly HR and Finance — have traditionally eluded many organizations. A siloed approach won’t work in the future.
Whitepaper: Crafting Performance Plans With The Company In MindIconixx
Employees work on two levels. On a fundamental level, they work for their own career and daily responsibilities, and on a greater level, they work for the company as a whole, upholding and advancing its mission and goals. The key to maximizing each employee’s value and commitment to both causes lies in the business’s ability to tie them together.
Whitepaper: Adding Strategic Value to Your Organization with Incentive Compen...Iconixx
As an Executive, you need to understand how ICM adds strategic value to your organization to support business objectives. This White Paper answers your questions and demonstrates potential benefits.
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Whitepaper: Using "What-If" Scenarios For Predictive PlanningIconixx
Uncertainty can be effectively removed when using “what-if” analysis to calculate and forecast exactly how those tweaks will affect the business. This especially comes in handy when planning changes to a compensation plans because of the number of variables involved: plan design, individual performance, territory definitions, quotas and sales force being among the most notable.
Whitepaper: Using Technology to Manage and Optimize Incentive CompensationIconixx
In today’s complex business environment, companies increasingly struggle to manage their plans across hundreds or thousands of product lines, customers, territories and employees. Consequently, companies from all industries are using Incentive Compensation Management (ICM) technology to manage and optimize their compensation plans.
More than 8 years of accumulated big data delivers intelligence and best practices to organizations in all sizes, industries. These are the seven practices that our data shows work against you in your quest to incent right.
Strategic Account Management Association (SAMA) Session: Case Study on Custom...Revegy, Inc.
Presentation from the 2017 SAMA (Strategic Account Management Association) Conference featuring Shawn Green, Vice President for strategic accounts for BlackLine, discussing how they leverage a best practices framework and account planning/management technology to double key account revenue.
IB Business and Management (Standard Level)
All material taken from the IB Business and Management Textbook:
"Business and Management", Paul Hoang, IBID Press, Victoria, 2007
This is meant to provide interested parties of an example of what a KAP could look like. It is subject to change and is dependent to specific requirements of companies and their reflective market places, accounts, customers, and competition. It is merely an example.
If you chose to use it, it is at your own risk of success.
Driving Performance Through Enhanced Collaboration between HR and Finance.
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Whitepaper: Crafting Performance Plans With The Company In MindIconixx
Employees work on two levels. On a fundamental level, they work for their own career and daily responsibilities, and on a greater level, they work for the company as a whole, upholding and advancing its mission and goals. The key to maximizing each employee’s value and commitment to both causes lies in the business’s ability to tie them together.
Whitepaper: Adding Strategic Value to Your Organization with Incentive Compen...Iconixx
As an Executive, you need to understand how ICM adds strategic value to your organization to support business objectives. This White Paper answers your questions and demonstrates potential benefits.
Whitepaper:Barriers to Effective and Strategic SPM CompensationIconixx
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Whitepaper: Why Millennials Want Innovative Reward Strategies From EmployersIconixx
Millennial workers are a vital part of U.S. corporate culture, as they are the largest generation since the baby boom. They are already making their presence felt by introducing different ideas about the best ways to work and new sets of workplace values. Managers are quickly realizing millennials need to be managed and motivated differently than other generations. One of the most effective ways to make millennials feel appreciated is through incentive compensation.
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Uncertainty can be effectively removed when using “what-if” analysis to calculate and forecast exactly how those tweaks will affect the business. This especially comes in handy when planning changes to a compensation plans because of the number of variables involved: plan design, individual performance, territory definitions, quotas and sales force being among the most notable.
Whitepaper: Using Technology to Manage and Optimize Incentive CompensationIconixx
In today’s complex business environment, companies increasingly struggle to manage their plans across hundreds or thousands of product lines, customers, territories and employees. Consequently, companies from all industries are using Incentive Compensation Management (ICM) technology to manage and optimize their compensation plans.
Whitepaper: Surprising Attitudes Millennials Have About Total CompensationIconixx
Companies must understand what millennials think about compensation. The notion is that millennials constitute the entitlement generation – but as with many other perceptions surrounding millennials and compensation, there’s much more to it than appears.
Whitepaper: The ROI of Incentive Compensation ManagementIconixx
Learn how to make the business case for an Incentive Compensation Management system. Understand the ROI delivered by such solutions so that you can justify the ‘spend’ and feel confident that your organization will realize tangible and meaningful business results.
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The newspapers, internet and television media are constantly covering stories concerning our youth. Many of the stories relate to what is called “Breaking News,” which is most often shared on CNN.
The stories shared on CNN have a very catchy title that could break any strong heart and it goes like this: “A Young teen is shot by a police officer after he displayed a weapon.” “A Young teen was asleep in bed and gun shots rang out in the room and killed the teen.”
Whitepaper: The Importance Of Automating Merit CompensationIconixx
Merit Compensation only works when everyone understands and internalizes the plan. How do you keep everyone informed and everyone pointed in the right direction?
You communicate effectively, ensure everyone has access to the Merit Compensation process, and leverage the automated workflow to keep people informed, engaged and focused on the company’s overall goals.
Compensation plans include understanding what the marketplace is offering and establishing your salary levels or pay rates for each position in your company.
Compensation planning must be done carefully and strategically to attract and retain the best talent, especially in tight, competitive labor markets and in certain industries.
Cash or short-term incentive plans (STIP) engage employees in the process of achieving business objectives, reward desired behaviors, and help execute the organization’s long-term strategy. Incentive plans, when properly aligned to business outcomes and rolled-out effectively, can be a powerful tool that enable organizations to “do more with less” and achieve a greater return on investment (ROI) in cash compensation programs.
Building a Meaningful Compensation Strategy for Today’s WorkforceHUB International
Download the eBook from HUB and learn key strategies to ensure your employee compensation plans continue to support your organizational goals as talent acquisition and retention challenges grow.
Whitepaper: Predictive Analytics - Looking to the FutureIconixx
Successful companies move forward. They look to the future. That’s why Predictive Analytics are essential to setting business strategy and leveraging data to look ahead and predict how those potential strategies will meet corporate goals.
DOs & DON'Ts of Short-Term Incentive Compensation PlansCBIZ, Inc.
Motivating workers is critical to corporate success. Organizations across the country are seeking to continuously improve employee performance, while simultaneously controlling costs. Establishing or expanding incentive compensation programs can be an effective strategy to achieve this objective.
As a business leader, you don’t want to get involved in pay minutia. It’s not your role and such details divert your focus from more critical priorities. However, setting a pay agenda that drives growth is a strategic issue that must have your full attention. Without your leadership, pay can become a costly nuisance that inhibits performance and drains profits.
VisionLink's article will give you a clear understanding of why and how you should guide the rewards approach your company takes. Turn pay into a strategic growth tool for your business!
Aligning your compensation philosophy with business prioritiesPayScale, Inc.
As an HR leader, you play a key role in your organization's success. It's crucial that you work with your company's executive leaders to develop a compensation strategy that supports company business objectives.
In this free, one hour webinar session, Stacey Carroll, SPHR, MBA will present the basics of leading an organization through the steps to align its compensation philosophy with its mission, and values. This webinar will give you a core understanding of the connection between business and compensation strategy.
ALL THE DETAILS ARE MENTIONED IN THE DOCUMENT RELATED TO ALL 4 PERSPECTIVES OF BSC.
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The executive program in strategic finance course offers a career-changing CFO training experience to enhance the “next generation’s” ability to become a successful Chief Financial Officer. It aims to elevate the CFO role to one of a “value integrator.” It helps CFOs enhance their ability to forecast, measure, and monitor business performance; manage risk; and generate predictive insights
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Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
2. FORECASTING, BUDGETING AND ACCRUING BONUSES
AN INCENTIVE COMPENSATION IMPERATIVE
For companies in all industries, incentive compensation and bonus structures are valuable tools for
enhancing performance and meeting company goals. Performance bonuses create alignment --
connecting individual and team goals with the organization’s overall objectives.
Properly designing and implementing a bonus compensation structure requires looking to the
future. It demands detailed financial planning around how performance may drive company
revenues and how bonus payouts will impact the bottom line.
Planning for bonuses can be complicated by many variables.
Overview
Will employees and teams achieve their bonus targets?
If so, how much revenue will they generate?
How will increased revenue translate into bonus payouts?
Are the bonuses working? In other words, how much are we paying for these
additional revenues?
These variables are even further complicated by the size and complexity of today’s organizations.
Enterprise organizations have sales forces with hundreds or thousands of members, a diverse range
of product lines, and a broad array of territories, each with its own priorities and activities. At the end
of period, some sales reps, products or territories will meet their targets, while others will not.
Bonus payments are real dollars. They must be factored into the financial planning of your
company’s ongoing performance and its future growth. Consequently, the financial management of
incentive compensation and bonuses is a complex process of forecasting, accruing and budgeting.
3. FORECASTING, BUDGETING AND ACCRUING BONUSES
AN INCENTIVE COMPENSATION IMPERATIVE
HISTORICAL BASELINE
Once a company has a long-term dependable dataset of its performance, it can
establish a historical baseline of incentive targets and bonus payouts.
The historical baseline can be used to estimate the likelihood that the organization
will reach the bonus targets, and if so, by what degree. The historical baseline can
also be used to assess the effectiveness of various incentive compensation initiatives
and to what degree they can be realistically expected to increase performance.
The baseline can uncover questions such as:
WHAT IF ANALYSIS
A robust dataset is also useful for conducting What If Analysis by examining different
scenarios and the potential benefits, payouts and growth that may be realized from
certain incentive plans.
Over time, this practice creates a more dependable historical baseline that will allow
managers to properly project and analyze their compensation plans.
The starting point for planning incentive compensation and bonus structure is to forecast future
performance. There are some key metrics and tools to help companies with their forecasting
exercises.
Forecasting
• How much are you paying for performance?
• What is your overall payout for incentives such as bonuses?
• What is your compensation costs? How much are you spending to generate your
revenues?
• What is the optimal payout dispersion? How to ensure the top performers are paid
highest and the low performers less?
4. FORECASTING, BUDGETING AND ACCRUING BONUSES
AN INCENTIVE COMPENSATION IMPERATIVE
As the incentive compensation system gets implemented and the teams pursue the companies goals,
the financial departments must accurately track the performance levels and manage the payouts. As
such, companies must account for the cost of growth along with their future cash needs.
Proper accruing needs timeliness and accuracy. Companies must focus on how and when expenses are
reflected on the income statement.
In certain accounting practices, primary expenses such as bonus payments must appear on the
statement in the same period that the sale is reported, regardless of when the commissions are paid. As
the bonus payments go out, it is imperative that the payouts appear on the statement.
This can be challenging. In a homegrown or spreadsheet-based system, the accounting department will
spend significant time and energy making the calculations rather than conducting strategic analysis.
Accruing
While bonuses have potential for increasing performance and raising revenues, they present a
budgeting conundrum.
What if you budget for a bonus that may not occur? Or what if you fail to budget for a bonus that does
occur.
The metrics and tools described above – Historical Baseline and What-If Analysis – are essential for that
can help in budgeting for bonuses.
Budgeting
ATTAINABILITY
The historical baseline and the What If Analysis can help managers assess whether
likelihood of whether individuals and teams can meet the targets, or whether the bonus
levels are attainable.
Many companies follow the practice that where the analysis shows that reaching the
targets is likely, then they budget for the payout. On the other hand, if the analysis shows
that reaching the target is unlikely, then they generally do not budget the payout. When
various levels of bonus payout are attainable, some companies have found it prudent to
budget for the most likely achievable level.
5. FORECASTING, BUDGETING AND ACCRUING BONUSES
AN INCENTIVE COMPENSATION IMPERATIVE
Automated ICM Solutions – An
Essential Tool
FORECASTING
In these cases, the automated solution is a valuable tool for strategic planning, and
effective in producing a historical baseline and conducting “What If” analysis to explore
the potential impact of different approaches.
With automation, employees and managers can test the impact of various work
strategies by conducting “What If” analysis, using the system to forecast the bonus
payouts from potential performance scenarios
BUDGETING
An automated system provides a platform for using historical baseline and What If”
analysis to determine the attainability of target levels, then budget accordingly for
bonuses.
ACCRUING
Each month, the automated system quickly records an incentive compensation accrual.
An automated process also ensures that the entries are SOX-compliant.
Managing the incentive compensation and bonus plans can be complex. To realize the full benefits
of Incentive Compensation Management (ICM), companies should leverage an automated ICM
solution. ICM technology gives companies they need for forecasting, budgeting and accruing the
compensation process.
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