Commission and Buyback Structures can be a confusing idea to fully grasp, especially for Auctioneers that are new to the Auction Industry. This brief chapter will attempt to highlight and explain the main points behind Commission and Buyback structures. Hopefully this information will help you decide what Commission you would like to collect or how to correctly set the software to collect your current Commission rates.
WHAT TO CALCULATE COMMISSION BY
Each (Each individual lot sold) - Useful when using a structure type of Sliding Scale or Incremental.
Invoice Line - Takes into consideration the quantity of a particular lot being sold.
Consignment Order - Calculates commission after totaling the amounts of all lots sold (common with Flat structures).
Each (Over Reserve) - You are only collecting on the sold amount over and above the Reserve.
Invoice Line (Over Reserve)
COMMISSION STRUCTURES
Sliding Scale - Looks at the final sold price and determines the commission by the range that price falls into.
Incremental - Calculates different commissions on each increment of the sold price.
Flat - A simple Flat percentage across the board.
Now we combine any of the above structures to any of the above methods of calculations. Lets take a look at some common Commission Settings:
In this above example, the software will calculate the commission based on the sale price of each lot. If the lot sells anywhere between $0 - $500 the item will net you a 15% commission, $500 - $5,000 a 10% commission, anything above $5,000 will bring you an 8% commission rate. The two settings we have here are the 'sliding scale' and the fact that the software calculates 'each' lot by its sold price.
If we had chosen to Calculate Commission By: Consignment Order, the software would have first totalled up the sold price for all lots for a consignor and then charged the particular percentage corresponding to the range the total fell into.
The above example is the most common setting to calculate commission. You will see that we are charging a flat 10% for everything this consignor sells. We will calculate the commission by the 'Consignment Order' so our CO Settlement Reports will only have the single calculated commission in the subtotal area. If we had chosen 'each' we would see a calculated commission on each sold line item on our CO Settlement Reports.
The above 'Incremental' example is the more uncommon approach to commission, but we would still like to cover the principle. In this specific example, lets assume that we sell an expensive piece of artwork for $22,000. In this scenario the $22,000 would actually have 3 different commission rates applied to it. The first $1,000 of the $22,000 would be charged a 25% commission, the next $14,000 (bringing the total to $15,000) would be hit with a 15% commission, and any remaining amount ($7,000 in this case) would be charged a 10% commission rate.
You can see, give all three given examples, what a true benefit it is to allow the software to calculate all of your Commissions for you while eliminating any human error. If you are still not sure or confused on what Commission structure is right for you, please see our more detailed chapter or feel free to give us a call and one of our software specialists will be more than happy to assist you.
Buyback Settings:
Not all auctioneers utilize Buyback charges for their auctions. You will, however, if you want to charge a consignor a fee for an item either a. not selling for the reserved price, or b. not meeting a price acceptable to the consignor. If you do not want to charge any fee for passed, or not sold lots, you can simply clerk the lot as 'not sold'. Most of the time auctioneers will charge a fixed price for a Buyback. You will also notice that we always calculate the Buyback on 'each' item not sold.
In the above scenario, we are simply charging the consignor a $20.00 fee for each of the lot's that are clerked as a Buyback.
In order for the buyback fees to be applied to the Consignment Order, you will need to check out the buyback bid card number you used when clerking it.