Lag Time

What is Lag Time?

Lag time (also called payment delay or commission lag) is the period between when a deal closes and when the sales rep receives their commission. This delay exists because companies need time to verify deals, calculate commissions, process payroll, and ensure accuracy. According to Pavilion (2024), 73% of sales reps cite lag time as a significant source of frustration.

Why Lag Time Happens

Several factors contribute to commission delays:

• Deal verification: Confirming contract terms, pricing, and customer signatures
• Data processing: Moving deal data from CRM to commission system
• Calculation complexity: Applying rules, splits, tiers, and adjustments
• Approval workflows: Manager sign-off on calculations
• Payroll cycles: Aligning with company payment schedules
• Payment collection: Some companies pay only after customer payment

Typical Lag Time by Trigger

Payment Trigger	Typical Lag	Common In
At deal close	15-45 days	SaaS, tech sales
At invoicing	30-60 days	Services, consulting
At customer payment	60-120 days	Large enterprise deals
At implementation	90-180 days	Complex projects

How Lag Time Affects Sales Teams

Negative Consequences

• Cash flow pressure: Reps can't pay bills with pending commissions
• Motivation drop: Disconnects effort from reward
• Trust issues: Long waits create suspicion about accuracy
• Retention risk: Reps may leave before commissions pay out
• Planning difficulty: Hard to budget with uncertain income timing

Business Reasons for Lag

• Cash management: Company collects payment before paying out
• Accuracy: Time to verify and correct errors
• Clawback protection: Ensures deals don't churn immediately
• Administrative reality: Processing takes time

Lag Time Examples

Example 1: Standard SaaS Lag

Rep closes deal on March 15:

Event	Date	Days from Close
Deal closes	March 15	0
Period ends	March 31	16
Commissions calculated	April 7	23
Approval complete	April 10	26
Payout received	April 15	31 days

Example 2: Payment-Triggered Lag

Company pays commission after customer payment:

Event	Date	Days from Close
Deal closes	March 15	0
Invoice sent	April 1	17
Customer pays (Net 30)	May 1	47
Payout received	May 15	61 days

Industry Benchmarks

Lag Time	Assessment
Under 15 days	Excellent – competitive advantage
15-30 days	Good – industry standard
30-45 days	Acceptable – room for improvement
45-60 days	Poor – likely causing problems
Over 60 days	Problematic – retention risk

According to Alexander Group (2024), the average lag time is 28 days for SaaS companies.

How to Reduce Lag Time

Automate calculations: Eliminate manual spreadsheet work with automated commission systems.

Real-time data sync: Connect CRM to commission system automatically.

Streamline approvals: Reduce approval bottlenecks with clear workflows.

Increase payout frequency: Move from monthly to bi-weekly where possible.

FAQ About Lag Time

What is an acceptable lag time?

15-30 days is considered industry standard. Under 15 days is a competitive advantage for talent attraction.

Should commission be paid on deal close or customer payment?

Payment at deal close motivates better and reduces lag, but increases clawback risk. Consider your company's risk tolerance.

How are delays best communicated?

Set clear expectations in the commission plan and give reps visibility into pending commissions and expected dates.

Reduce Lag Time with Prowi

Long lag time often stems from manual processes. Prowi automates commission calculations in real-time, eliminates spreadsheet delays, and gives reps instant visibility into pending earnings—so you can pay faster and keep your team motivated.