$100,000 Commission Accrual Issue

Accruing commissions properly can have a significant impact on your P&L!


This is one of the most common accounting issues we see when doing our internal audit style FCFO reviews, which ultimately leads to financial statements that are simply inaccurate by significant amounts. While the variance will depend on your sales volume and commission model, we see 6-figure inaccuracies frequently.

Scoby Bros has a fully commissioned sales team which makes commission a significant expense. Our exploratory review determined a commission expense adjustment was needed that reduced profitability on the books by over $100,000.

Scoby Bros. President Luke Scoby mentioned “The good news is that this didn’t negatively affect our cash flow, and it reduced our 2023 taxes! Getting Alexis at Promo Consulting to clean up our books was a great investment and now she provides a month-end service with oversight to make sure our books are accurate after every month end. This provides us with a much better idea of actual profit, and we can finally trust our P&L when making business decisions”.

Another distributor client was facing a $500,000 discrepancy regarding commission accruals, so if you pay lots of commissions, this is a topic you should pay attention to.


 Commissions are your second largest expense after COGS, so they have a big impact on profitability. Most are paying commissions based on the industry standard “paid-on-paid” model which is good for cash flow. But what’s missing is expensing your commission in the same month as the revenue & COGS so that your monthly profit is accurate. It’s ok to delay paying the commission on an invoiced order until after the invoice is paid, but you need to expense the commissions on your P&L in the same month the invoice is done. This is where “accruals” come into play so that profit is accurately reflected on your P&L at month end.

Accruals wouldn’t be such a big deal if we had consistent sales every month. But that’s not how the promo industry works, and we typically see monthly sales differ by as much as 50% over the course of 12 months. If your P&L shows big profit for one month and then much less, or even a loss, next month, accruing commission properly is likely the issue.


The good news is that accruing commissions at month end is as simple as adding one extra step to the month end process. Syncore has a report designed specifically for this purpose, which gives you the information you need to enter one general journal entry into QuickBooks to complete the process. Other ERP and accounting systems should have an easy way to handle this as well.

Making good business decisions requires accurate financial statements, and accruing commissions is one of the easiest ways to get headed towards trusting your P&L!