
Recoverable Draw
There are two different types of sales commission draws– recoverable and non-recoverable. A recoverable draw against commission is money paid to a sales rep paid from the future commission they earn.Continue Reading
What is a non-recoverable draw?
A non-recoverable draw, often called a non-recoverable draw against commission, is a common element of sales commission plans. You can think of a non-recoverable draw against commission as a guaranteed minimum payment that your sales team will not need to pay back to the organization.
If a sales representative earns less than the non-recoverable draw amount, they will be paid the difference. That amount will not be held against the rep as debt in future pay periods. If the rep earns more than the non-recoverable draw amount, the rep will be paid the entire amount they earn with no draw.
The intention is to provide a livable wage for all reps in times when it’s not possible or more difficult to earn commission– especially when it comes to seasonal businesses or inconsistent sales cycles.
A draw against commission is a common element of many commission-based compensation plans where reps can borrow from their future commission earnings to maintain a more stable income. There are two types of draws, recoverable and non-recoverable draws.
These payments provide sales reps with the money they need to cover living expenses during seasonal lows, ramp periods, or other times when it’s not easy to earn a living off of commission alone.
Under a recoverable draw, once the rep starts earning commission again, they repay the draw amount from the money they make in commission. When a salesperson earns more commission than the draw amount, they typically receive the draw amount plus any money left over after their draw balance is paid off.
A non-recoverable draw is different from a recoverable draw in that under non-recoverable draws, the borrowed amount does not need to be repaid in the next pay period and is not carried over. This is unlike a recoverable draw which is carried over and accrued as debt and then taken out of future paychecks. You can think of a non-recoverable draw as a guaranteed minimum commission payment.
In this example of a non-recoverable draw, let’s pretend this is the pay for a brand new sales rep. The company has instituted up to a $2,000 non-recoverable draw for the first six months of an Account Executive’s tenure. This is to make sure the rep earns a fair wage while they’re still getting the lay of the land.
We’ve seen a lot of different sales compensation plans during the implementation of Spiff at our clients. Sometimes they want a quick and easy translation from spreadsheets to our object-oriented system or they’re desperate to motivate their reps and ask our advice on how exactly we would do that. While every company has unique needs that fit their situation, our friends at SaaStr have put together a template for SaaS companies to follow.
Spreadsheets are amazing. They have made handling complex mathematical scenario modeling available for everyday people. Through spreadsheets, anybody can handle huge amounts of data from multiple sources, easily manipulate the data, do calculations, summarize, and visualize the results. The learning curve to get started is extremely low, and the possibilities of what you can do are nearly limitless.
Sales Development Reps– or SDRs– are a crucial part of any business. SDRs are often the first line of qualification and a major source of pipeline at most organizations. To put it bluntly, how you compensate your SDRs can make or break the success of your sales organization.