Commissions can be a very significant source of revenue for auxiliary services departments at colleges and universities. However, the amount that vendors owe you could be miscalculated; meaning, your school is being underpaid.
Let’s take a look at the reasons for validating your vendor commissions as well as a few simple steps to boosting your auxiliary service department’s vendor management.
Explaining Vendor Commission Structures
The way commissions are calculated by vendor partners can be complicated. A “simple” commission is a flat percentage of sales, where you are always paid, say, 12% on the total number of sales.
On the other hand, complex commissions may be dependent on different sales levels, such as a 10% commission rate for sales between 1-2 million and 12% for sales between 2-3 million. Alternatively, commissions may be based on different product types (for example, energy drinks may offer a higher percentage than water bottles).
The Importance of Validating Payments
Complex commission structures are especially important to take note of, as it’s where vendors usually miss payments. For example, a vendor’s accounts payable system may be set up to pay a flat rate that does not reflect the need for higher commissions. Regardless, you should utilize a contract and revenue management system to keep track of the agreed upon commission rate to ensure you’re being paid the correct amount.
Notably, many schools do not validate payments; they simply accept the checks they are sent. But if you take the time to ensure the payment information is correct, you could recapture lost revenue opportunities.
Easy Ways to Improve Commissions
By examining trends related to commissions, you can easily identify where you have top performers or where certain retail locations could use improvements. Once you have this raw data compiled, you can bring your suggestions to your business partners for consideration. If they choose to implement the changes, both the school and the vendor could earn more revenue.
If you keep a close eye on your vendor commissions, more than likely you’ll find opportunities that may have otherwise slipped through the cracks. A great example is how one of our clients, a major college in Orlando, Florida, was able to increase their vending revenues by $30,000 in a 12 month period by validating their commissions and suggesting changes to products and offerings.
As we mentioned above, many schools opt not to track their vendor commissions and payments. Two reasons why are because the calculations are complex and the volume of data they have to sift through.
Clearly, this process would benefit from being automated in order for it to maximize success. RevenueVision, an operational, financial, and contract management system designed specifically for the “business” of higher education, is able to track and validate vendor commissions so you can spend more time on proactive decision making to better improve your college or university.