If you have commission employees on your payroll, then you know that the bookkeeping is a bit more complicated than if you just had standard hourly employees. There are more things to keep track of, and more notations you have to make on an on-going basis. If you are not quite sure what you need to do to make sure your bookkeeping records are up to date and stay that way, then here are a few tips to help.
Do Not Let Your Bookkeeping Fall Behind
The most important part about bookkeeping is that you make sure that it stays current. You cannot let the numbers fall behind, because once you do, you will perpetually be playing catch up. The best way to avoid this is to make sure that as soon as a commission gets paid, you update your books. This method of bookkeeping will keep your records current, and not leave you in a position where you have to try and recall each payment as it was made.
The Two Types of Accounting for Commission Employees
There are two main types of accounting when you are keeping track of paying commissions to employees or outside representatives. First, there is the cash basis of accounting, and this is when you need to go in and mark down any commission paid immediately upon paying it. This goes directly to the employee for their part in the sale of a product or service that benefits the company.
Then there is the accrual type of accounting. This is when you let the commissions add up, and pay out similarly to when you would pay an hourly employee. This may be on a daily, weekly, bi-weekly, or monthly basis, depending on how you have your commissions set up. This could also be different for each employee, as some may get paid weekly after they earn the commission, while others may get paid on a different schedule.
Bookkeeping is difficult if you are not keeping track of every single penny that goes in and out. When it comes to commissions, bookkeeping can be even trickier in that you have to consider percentages off of each item sold or the different amounts of time spent. If you always keep your bookkeeping records current, then you will have one less headache to deal with, and you will better be able to stay on top of things.