When you start an MLM company, building leadership that enables their distributors to develop a successful downline that creates any kind of reasonable income takes time.
While it’s a good thing when distributors make sales, it can be difficult to track how much you must pay in commissions, especially as your every leader’s downline grows.
Managing an MLM company comes with its challenges. For one, the hierarchy is too diverse to bring under a singular pay scale. As a result, you will have different groups on different commission structures. This can cause headaches when it comes to payday. You may also have sliding commission structures where team members are paid different commissions according to how much volume they’ve purchased or sold.
The good news is that these challenges don’t have to be as problematic as you might imagine. You can take steps to help ensure the process goes smoothly for you and commissions are paid accurately.
Let’s look at some essential pointers on how to correctly and accurately track your MLM commissions, no matter how much or how quickly you scale.
1. Research What the Competition Pays
Although researching the competition won’t necessarily help you track your commissions, it’s an essential step for finding the proper commission structure. So before you start your MLM enterprise, pay attention to which products other companies are selling to help you choose a product that sells, and look into what kind of commission structure your competitors are offering.
While you want to limit how much you pay to improve your bottom line, it is also vital to offer competitive commissions to help attract the best leaders. The better the leaders working for you, the greater your profits are likely to be.
It’s also good to research which tracking systems other companies use. But, again, you will find plenty of information online from other companies that have experience working in the MLM industry.
2. Define Rank-Based Payouts
MLMs will typically consist of various ranks and roles, each likely to have a different pay structure. Therefore, the different pay structures make it essential for you to define how much commission you pay for people in particular ranks.
Ideally, such a structure would have a tiered system, with commissions based on their roles’ complexity and contribution to your bottom line.
Distributors need to recoup their initial investment and be rewarded with a regular payment schedule. Modern communications technology offers instant payment solutions, and there is no valid reason to withhold distributor payments. After all, it’s essential to keep the whole field as motivated as possible.
Regardless of which system you use, remember that there needs to be an emphasis on incentives. Incentives are what drive your MLM team members to work harder to get as many sales as they can. There’s little reason for your team to do their best without incentives to do better.
Use the online tools like DirectScale you have available to recognize, incentivize, and reward your distributors. As a result, your sales are likely to take a hit, and your team members may end up moving to other companies instead.
3. Keep Compensation Plans Simple
Creating sophisticated commission structures that involve various cluster rewards and other incentives can be tempting. However, using complicated systems can make your task much more difficult.
Whether it’s unilevel, binary, affiliate, or a hybrid, it’s best to keep your commission structures as simple as possible to help make them easier to understand. All rewards should ideally be paid out into single amounts.
Not only will simple payment structures make things easier, but they will also be easier for your team to understand. Otherwise, they might become confused about how much they are due, potentially resulting in disputes. In addition, you can pick a commission provider that allows you to test and model your compensation plan before committing to it.
If disputes arise, it may drop morale, and low morale can significantly impact performance.
4. Use a Secondary Tracking System
Things can quickly get very confusing for you if you have an extensive downline with many distributors closing many deals. Errors can be made, and it can be challenging to work out who you need to pay and how much, which can be very frustrating for all concerned.
One way to help ensure accurate payments without frustration is to use a secondary tracking system.
A second tracking system will give you a second source of information that can help verify your main system, helping to eliminate discrepancies. Not only will this help to ensure you make payments correctly, but it can also help save you a lot of time on accounting.
It’s also a good idea to integrate your secondary tracking method into your first to help make it easier to keep records. With integrated systems, you will have all the information you need in the same place.
5. Produce Reports
Reports will help make it much easier to see what they have paid and what they still owe. Reports won’t just make it easier for you to track payments and revenue, but they will also help ensure your team finds it easier to raise any discrepancies if needed. With the right systems in place, reports can be produced and sent to the appropriate people automatically, saving you a lot of time.
6. Take Your Systems on a Test Run
Unexpected complications are, well, unforeseen. Even the most thought-through plans can experience problems that you couldn’t foresee, so it makes sense to do a test run. Before putting your system into practice, run mock payments to check that everything is working as expected.
Test out all aspects of the system, including payments made to roles with different commission structures. If you find something wrong with the system, it will be much easier to fix during testing than paying real people expecting their money.
7. Let Team Members Track Their Commissions
It’s a good idea to give your team members access to a dashboard that will help them track their commissions. Doing so will make it easy for them to raise any disputes early, making processes a lot smoother on payday.
Ideally, the dashboard will give team members details such as which sales they’ve made, how much the deals are worth, and how much commission has been earned per sales and overall.
The dashboard should also allow team members to raise disputes quickly, with digital tickets that inform you of any discrepancies. Such a system would make it easier for accounts to process disputes without them having to spend time calling or emailing team members.
DirectScale can help you will all of these.
8. Educate Your Team Members on Your Tracking Tools
It will be much easier for you to track commissions if you educate your field on the tracking tools you’re using. It’s essential to teach them how tracking platforms work and how to use their features. Everybody in your downline should ideally be able to recognize and query any discrepancies.
Ensure that your field understands the need for everyone to use the same payment system for commission tracking. Some might be eager to use social media for their convenience, but this only means more of a headache for you and may require the assistance of a local social media management company.
Educating your team on the importance of using the tracking software correctly is also important to help ensure they understand why it needs to be used. Let them know that it’s not just to make things easier for you but also to help ensure they are paid correctly and quickly every time.
9. Invest in Customizable Commissions Tracking Software
A wide range of software is available to help make it easier for you to track commissions, and it would be wise to take full advantage. Ideally, the software should be customizable to ensure it works according to your needs.
The software should also be scalable, helping to ensure the platform will continue to serve your needs as your field and business grow.
The best MLM software providers like DirectScale allow you to quickly audit and modify your compensation plan and commissions payouts – on your own and without additional cost. Provided the input is correct, payday can come and go as quickly and efficiently as a few mouse clicks.
10. Keep on Top of Your Commission Tracking
If you don’t plan properly and don’t use the right tools, then tracking and paying commissions can become very difficult and frustrating work. However, proper planning and using the right tools will help ensure everything goes smoothly for you.
The right tools can automate much of the work, making tasks faster, smoother, and more accurate. Try to get your team involved in the process to help make payments smoother for them and yourself. Remember to educate them in the systems you’re using and encourage them to work with you on ensuring the system works.
Managing a large downline with many distributors can be hard work, and mistakes will likely happen. However, you can make your life a lot easier with the right tools while also ensuring your team is paid the right amount and on time.
Your first step should be to define your payment structure, making it easy to follow so your whole downline understands it. You should also invest in the right software to help you track sales and commissions and let you produce helpful reports.
It’s also a good idea to get your distributors involved with your systems. Show them how to use them and educate them on how they are important and beneficial for all parties. With everybody pulling together to meet the same goal, you will have far fewer headaches when it comes to tracking commissions.
Luckily, there is a great partner to help you on your MLM journey. If you want to be on top of your commission payouts, hop on a call with DirectScale and see how you can level up your business.