A new generation of software that uses pay-tracking technology and incentive-payment applications promises to help management find mistakes that often escape audits and other means of error detection.
Mistakes in bonuses and commissions can add up quickly. For example, there have been media reports that as much as $4 million in phony sales commission was pocketed by more than a dozen employees at WorldCom before the company was forced into bankruptcy.
Technology companies that plan to market pay-tracking technology include Advanced Information Management, Callidus Software, Centiv, Kadiri, Motiva and Synygy, as well as Oracle, SAP, Siebel, and PeopleSoft.
ZDNet describes how the software works as follows:
- Companies purchase the software and customize it to reflect their internal rules and the structure of their commission and bonus programs.
- The software grabs sales and other performance data from a company's ordering system or HR system and calculates the commission.
- The payment data is fed into the company's payroll system. Along the way, the software generates reports for managers that can also be used in audits to catch errors and cheats.
In addition to catching mistakes, the applications can be used for planning purposes, so management can understand the financial effects of new incentive-pay rules before instituting them. The software also helps deter shadow accounting by sending frequent updates to employees via the Web or e-mail, so the employees don't have to spend hours calculating and tracking commissions on their own because they don't trust their company to get it right.
A key risk of adopting the software is that it can be a challenge to set up, leading at least one company to give up after six months of trying to make the system work.