A commission accrual is the compensation expense recorded in the period a deal is booked, before the money reaches the rep. It exists because the cost of a sale belongs in the period the revenue was earned, not in the month the payroll run happens to fall.
The earning event and the payment event are separate
A rep earns commission when the deal books under the terms of the plan. The business pays it on a cycle that may sit a month behind, or after the first invoice clears, or after the customer passes a retention milestone. Accrue on the earning event and schedule the cash on the payment event. Recording only the payment pushes expense into the wrong period and makes gross margin look better in the quarter that generated the cost.
This split also drives two different outputs. The accrual feeds the expense line and the operating plan. The payment schedule feeds the cash forecast. Finance needs both, and a single number cannot serve both purposes.
Run the accrual rep by rep
The shortcut is to multiply a blended commission rate by total bookings. It produces a number that passes review and is wrong in a predictable direction. Accelerated rates concentrate cost among reps above quota, so a team averaging 100 percent attainment through a few reps at 160 percent and several at 70 percent costs more than a team where everyone lands near their number. An average cannot see that difference.
Split credit compounds the gap. When two reps are paid full rate on the same dollar, the effective commission rate exceeds what the plan document implies, and the difference stays invisible until the accrual arrives.
Reserve for reversal
Commission that has been accrued can still come back. Customers churn inside the clawback window, and invoices go unpaid. Size the reserve from your own reversal history rather than a round percentage. A plan with a twelve month clawback and material first-year churn will see a meaningful share of accrued commission recovered, and a reserve set by habit rather than by data misstates the expense line in both directions across the year.
Re-accrue as conditions move
An accrual set once at the start of a period ages the same way a revenue forecast does. Attainment shifts through the period, and the mix of base and accelerated dollars moves with it. ORM's own position is that a model built on old assumptions is the most common reason a forecast fails, and a compensation accrual is a forecast. Update it on the same cadence as the revenue number so the two never disagree, then track variance by rep. Persistent variance on the same rep points at a plan mechanic being applied differently than intended rather than at the accuracy of the underlying bookings forecast.
Frequently Asked Questions
When should commission be accrued?
In the period the rep earns it under the plan, which is usually when the deal is booked, regardless of when it is paid. If the plan makes payment conditional on invoice or on a retention milestone, the earning event is still the booking and the condition is handled through a reserve rather than by delaying the accrual.
What is the difference between accrued and paid commission?
Accrued commission is the expense recognized when the deal books. Paid commission is the cash that moves on the payroll cycle that follows. The two land in different periods, and reporting one as though it were the other creates month-end variance that is difficult to explain after the fact.
How do you accrue for clawback risk?
Hold a reserve against the accrual sized from your own history of early churn and non-payment inside the clawback window. Accruing the full payout at booking overstates expense in the current period and understates it later when recoveries land.
Why do commission accruals miss?
The most common cause is applying a blended rate to total bookings instead of running each rep's plan against that rep's own attainment. Accelerators concentrate cost at the top of the attainment distribution, and a blended rate cannot represent that. The error is consistently in the direction of understating expense.
Put these metrics to work
ORM builds custom revenue forecast models that turn concepts like commission accrual into prescriptive action for your team.
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