Ask the Experts | Salespeople Pay for Financing Dealer Fees?

Question: Should I hit my salespeople’s commissions for financing dealer fees?

Drew Cameron; President, HVAC Sellutions & Energy Design Systems, Inc.:

Absolutely no. It will be a deterrent to use a tool that can drive sales. In all of these calls where we talk about financing or payment options – credit cards, again, remember are also a form of a financing option – if we want someone to do something, we shouldn’t disincentivize them or put a deterrent to stop them from doing it. If you’re going to ding a salesperson’s commission and lower their pay, for something that actually requires a little more time and effort on their part to bring more sales to your business, it just doesn’t make sense to do so.

Now, I understand the question: The question is, “We have a dealer cost, how can I cover that dealer cost?” Don’t do what I came across last week, with one contractor in York, Pennsylvania, who quoted one of my software programmers on doing some work at his house: he literally typed into his quote, that if the customer was interested in financing to call, and the price would be higher to take advantage of financing.

You can’t do that, that is against the law. You can offer a cash discount if you like, but you can’t charge people, and tell people, it’s going to cost them more for financing. It makes no sense, I get it, I agree, it makes no sense whatsoever, but don’t go ahead and say that to people. You can offer a cash discount if you want to. I don’t recommend doing that – same price, cash or credit, it doesn’t matter, in fact most people who take advantage of doing business with us they don’t’ pay cash at all, and we like to promote the payment options. And you as a homeowner shouldn’t be penalized for wanting doing business with us if you need to go ahead and take advantage of payment options, it just kind of makes sense anyway.

So we don’t ding customers and we don’t ding our employees. That being said, the one thing we have to know about business is your people do not pay the company’s cost of doing business; your customers do. So you should cover the costs of financing in your overhead, spread it across the entire book of business, just like you do every other cost that you have. And the customer pays it. Whether they leverage the financing or not is irrelevant: everybody covers the cost of financing, just like they cover every other cost in your business.

So please, do not disincentivize your salespeople and ding them in their commission for financing. And that’s something, if you went and did that, from a legal standpoint, that needs to be disclosed in your compensation plan for your salespeople up front. You cannot arbitrarily ding people’s commissions for jobs going over, financing costs, things of that nature.

Gary I’ll throw it over to you if you have any thoughts on that.

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