As we discussed in a previous post, accelerated commission plans are a powerful motivational and management tool. But if you don’t plan for them properly, you can have some ugly surprises when its time to write the checks or to explain your results to your investors.

When designing processes and setting goals and objectives, there is always at least some element of moral hazard. Thats why in business and any other walks of life, the players aren’t allowed to be the scorekeepers and vice versa , even though the great majority of us are fundamentally honest and ethical. And when its hard to keep those roles separate, as often happens in comp plans, sometimes its easier and more rational to change the scorekeeping rules (i.e., the comp plan) than it is have unreasonable expectations for employee behavior.

At the highest level, there are three main metrics in a sales forecasting system: (1) total pipeline, (2) expected sales in the period (usually calculated as the sum of all pipeline deals, weighted by close probability), and (3) business closed so far. For reasons that I think this audience understands, all three are critical to track, each for different reasons. Even more valuable is comparing where you are in the current quarter to where you were at the same point in the last two or three quarters.

A useful and effective sales forecasting system is one of the Holy Grails of sales management. The components of such a beast will be topics of this post from time to time. But before we address any of those components in detail, I offer this fundamental truth about forecasting systems: A mediocre system thats used consistently is better than a perfect system that isn’t.

In high-tech companies, and especially in the software industry, business models are becoming increasingly varied and exotic. Thats especially true in enterprises focused on cloud computing and software-as-a-service (SaaS). Moreover, whether you like it or not, the GAAP rules for revenue accounting are becoming increasingly divorced from the underlying economic reality of the business transactions. In this new world, how should you compensate your sales force? Heres how: