As the best practice, should a VP of Sales (holds a team quota) be clawed back on commissions for a prior year booking (>12 months) that does not convert to revenue?

Probably. Just bear in mind, in almost all scenarios, clawbacks are overrated.

By all means, clawback bookings that don’t convert, or deals that don’t last the expected duration, etc. It’s good best practices, because if nothing else, it lets you pay up to the salesteam early. Salespeople may not like clawbacks, but if the alternative is to wait for cash to hit the bank … 99% of salespeople will take the cash now with a potential clawback down the road 😉

The thing is, clawbacks in practice don’t happen that often. When they do, they are often for fairly small sums compared to all your revenues. And they often happen to salespeople who are out the door anyway. Those ones often leave a few commissions behind anyway, so netted against that, the clawbacks may not matter.

Clawbacks are one of those things, like their close cousin, customers that sign but do not pay, that drive us nuts. But let it mostly go as a concern in practice. Usually, it’s a rounding area ultimately.

And if it’s a big cash issue, pay commissions on receipt of cash. That solves most clawback issues.

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Published on July 16, 2018

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