USA 2 Commission Cost Scenarios

Jan 25, 2024
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United States
This question involves a very hypothetical situation, so please pardon the odd examples. I understand there are also ethical questions that come up with this type of example, but that is not the focus of my question. If there is a better place to ask this type of question please let me know...

A solar installation company (Company) has a relationship with a lender that allows them to set up qualifying customers with a loan to pay for the solar panel installation using a software portal connected to the lender. A contract is signed, between Company and the customer and a value is assigned to the contract. Once the panels are installed and work completed, the lender pays Company the full value of the contract. The customer begins monthly payments to the lender and Company no longer has any relationship to the customer once the work is finished. Company has two marketing channels:

Channel 1: Inside Sales
An inside sales rep procures the customer, uses Company's software and gets them approved for a solar system. Here is a breakdown of what would happen to the P&L:
Value: $15,000 (Revenue)
Cost to install: -$9,000 (cogs)
Inside sales rep commission: -$1,000
Net income on this job: $5,000 (33% of Revenue)

Channel 2: 3rd Party Marketing Company
Marketing company has also been given access to the lending platform and they are able to set up qualifying customers the same way the inside sales rep is able to with one difference: they are able to increase the value of the contract to include their commission cost. For example, if they set up the exact same solar system as the inside sales rep, but wanted to increase the value of the contract by $5,000, that same system would look like this:
Value: $20,000 (Revenue)
Cost to install: $9,000 (cogs)
3rd Party Marketing Company commission: $5,000
Net income on this job: $6,000 (30% of Revenue)

The accounting for Channel 1 is fairly straightforward, but the accounting for channel 2 seems like there could be some nuance to it. Here is my question: Is there a way to account for the channel 2 transaction in a way that does not hurt Company's profit margin? Since the commission markup is set by the marketing company, the higher that markup, the lower Company's profit margin will be. Strictly from a GAAP accounting standpoint, is there a way to account for that markup so that it doesn't inflate the revenue number?

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