Shadow Accounting

The History of Shadow Accounting and Sales Commission

Shadow accounting, also known as shadow auditing, is common on sales teams where there is a history of commission errors. The reason for this is simple, a single commission mistake can fracture the trust between sales and finance. Once that trust is broken, reps take extra measures to keep an accurate record of their own pay so they have the information they need to file disputes and make sure they’re getting paid what they’re owed. 

Another common reason for shadow accounting on sales teams is a lack of visibility into sales compensation. If a rep feels they don’t have a way to quickly check how and why they’re paid, they’ll create their own tracking mechanism.

The Negative Impact of Shadow Accounting on Sales Teams

On the surface, shadow accounting may seem harmless. After all, it makes sense. If you don’t have what you need, creating it for yourself is proactive… right? Wrong. Let’s take a look at why shadow accounting is likely hurting your sales organization:

• Decreased productivity: If your sales team spends a large portion of their time formatting spreadsheets and updating data manually, that’s time they’re not spending on the phone or selling.
• Lack of motivation: It’s hard for reps to be motivated by sales commission without the proper resources to understand it. 

• Mistrust in leadership: A rep creating their own commission spreadsheet is likely to believe that they’re the only one who is looking out for their best interest. If leadership doesn’t care enough to pay their reps accurately and on time, why should the reps have any faith in leadership.

• Rifts between teams: Constant disputes and inaccuracies lead to rifts between sales and finance teams.

Shadow Accounting Statistics:

• Only 37% of sales reps’ time is being spent on revenue-generating activities (source).
• Sales agents who spend at least 3 hours every day on sales-related activities are more satisfied with their job (source).
• 65% of sales managers say that the biggest challenge for them is the lack of time and resources to perform their job (source).
• Happy workers are 12% more productive and unhappy workers are 10% less productive (source).
• 89% of sales turnover is caused by deficient compensation (source)
• On average, 88% of Excel spreadsheets have mistakes in them (source)