Compensation Cost of Sales (CCOS) is a simple concept. It indicates for every dollar in sales how much is spent/invested in sales compensation.
Total Cash Compensation ÷ Total Sales = CCOS
$150,000 ÷ $3,000,000 = 5%
However, it is important to recognize that CCOS is easy to calculate incorrectly. It requires attention to detail so that results are not skewed and mask actual sales compensation costs. Data collection challenges for many businesses may also increase the complexity and time to accurately calculate and analyze CCOS. Here are five reminders to correctly calculate your CCOS.