011 Vehicle Salespeople – Compensation and Other

Expenses

Variable Selling

Synopsis

All compensation including commissions, “spiffs”, prizes, and other payments paid to sales personnel are properly recorded in Account 011, Vehicle Salespeople – Compensation and Other.  Not included is absentee pay for vacation nor compensation for attending training classes.  Absentee wages are recorded in Account 024, Absentee Compensation .

Debits

Credits

  1. Salaries, Commissions, Spiffs, other compensation and Incentives based on department performance (except absentee compensation) paid or payable to salespeople for selling vehicles, protection plans, items recorded in Account 238, Other Automotive, and for vehicle leases

  2. Excess of guarantee over commissions earned

  3. Cost of prizes and premiums

  4. Fees and commissions paid to outsiders (e.g. “Bird-dog fees”)

  5. Vehicle sales commissions earned by a supervisor who also functions as a salesperson

  6. Salesperson Career Builder Program Fees

  7. The cost of various factory programs benefiting sales personnel such as

a.   The Mark of Excellence program

b    GM Performance Rewards

c.   GM Performance Rewards Bonus

  1. The month-end accrual of amounts earned during the current month, but payable in a subsequent period (i.e. next pay period)

 

  1. The reversal of the previous month’s accrual

Example 1

Record the accrual of salespersons commissions at month-end in the amount of $75,000 of which $48,000 is for the New Vehicle Department and $27,000 is for the Used Vehicle Department.

Journal: Payroll and General Journal

Entry:

 

Debit

Credit

Account 011-01

Vehicle Salespeople Compensation & Other – New Vehicles Department

$48,000

 

Account 011-02

Vehicle Salespeople Compensation & Other – Used Vehicles Department

$27,000

 

Account 321

Salaries, Wages & Commissions Payable

 

$75,000

Distribution of Expenses

 

Departmental Distribution

011 Vehicle Salespeople - Compensation & Other

New Veh.

Used Veh.

Lease & Rental

Mechanical

Body Shop

Parts & Access.

Gen & Admin.

 

01

02

03

05

06

07

09

Salespeople’s commissions

For new

Vehicle sales

For used

Vehicle sales

For leases

and rentals

 

 

 

 

Commissions and fees to outsiders

For new

Vehicle sales

For used

Vehicle sales

For leases

and rentals

 

 

 

 

Salaries and guarantees

Time

Time

Time

 

 

 

 

Prized and premiums

For new

Vehicle sales

For used

Vehicle sales

For leases

and rentals

 

 

 

 

Commission earned by a supervisor for selling a vehicle

Total

Commission

Total

Commission

 

 

 

 

 

Commission for selling other auto-motive items not installed on vehicles sold

For new other

automotive sales

For used other

automotive sales

 

 

 

 

 

Comments

The “Pay Plan” for salespeople should be simple and provide built in incentives for generating higher levels of gross profit and volume.  It should be competitive with respect to other dealerships in the area in order to attract talented personnel.  Once a successful Pay Plan is developed, it should not be changed unless there are compelling reasons.  Frequent changes to the Pay Plan have a demoralizing effect on the sales staff.

At the end of each month, the balance of this account should be analyzed by calculating the Compensation paid per vehicle and the balance should be compared to the total gross profit of the New and Used Vehicle Departments.  Total Sales Compensation should not exceed 30% of the department’s gross profit otherwise an operating loss is a likely result.