Agency Commission

What is Agency Commission?

Agency Commission represents a special type of subscription where your business acts as an intermediary or agent rather than the primary seller. In this model:

1. You collect the full subscription payment from the customer
2. You pass most of the money to a third-party provider or publisher
3. You keep a commission (your fee for facilitating the transaction)

This is different from regular subscriptions where you're the primary seller and keep all the revenue (minus costs).

Transaction Types

Agency Commission Revenue

Agency subscription revenue (commission portion only).

When it appears: When an agency subscription invoice is created

Affects:

• Deferred Revenue: Commission portion only (not full invoice amount)
• Cash: Full payment collected
• Taxes: Tax on commission portion

Examples: You sell $100 subscription, keep $15 commission, pass $85 to provider; marketplace transaction where you take 10% fee

Agency Commission Recognized

Agency commission recognized over time as service is delivered.

When it appears: As the agency subscription service is delivered over time

Affects:

• Deferred Revenue: Decreases (commission earned)
• Recognized Revenue: Increases (commission income)

Examples: Monthly recognition of annual agency commission, per-issue recognition of agency subscription

How Agency Commission Works

Standard Subscription vs Agency Subscription

Standard Subscription ($100):

You are the seller, you keep all revenue
- Cash: +$100 (you collect)
- Deferred Revenue: -$100 (you owe service)
- Later: Recognized Revenue: -$100 (you earn)

Agency Subscription ($100, 15% commission):

You are the intermediary, you keep 15%
- Cash: +$100 (you collect on behalf of provider)
- Deferred Revenue: -$15 (only your commission is deferred)
- Pass-through: $85 (goes to provider, not your revenue)
- Later: Recognized Revenue: -$15 (only your commission earned)

Complete Agency Transaction Flow

Example: $100 annual agency subscription, 15% commission

Month 1: Invoice Created

Month 2-13: Commission Recognized Monthly

After 12 months:

• You've recognized $15 commission revenue (your earnings)
• Provider received $85 (their revenue)
• You facilitated the transaction and kept your commission

Key Differences from Standard Subscriptions

Common Questions

Why is agency commission handled differently?

Because you're not the primary seller. In agency relationships:

• You don't deliver the core service (provider does)
• You're only entitled to the commission, not the full amount
• Accounting standards require recognizing only your portion as revenue
• The rest is a pass-through liability (money you owe to the provider)

How do I know if a subscription is an agency subscription?

Agency subscriptions are specifically configured in the system. Check the subscription settings or plan configuration. Typically, there's an "agency" flag or commission percentage set.

What happens to the 85% that goes to the provider?

That money:

1. Never becomes your revenue (not recorded in your Recognized Revenue)
2. Is held as a liability (you owe it to the provider)
3. Is paid out to the provider (recorded separately)
4. Reduces your Cash when you remit payment to provider

Are taxes calculated on the full amount or just the commission?

This depends on the tax structure and jurisdiction:

• Commission-based: Tax calculated on your $15 commission only
• Full amount: Tax calculated on $100, then split proportionally

Check with your tax advisor for your specific situation.

What if the provider wants their money immediately?

The timing of when you pay the provider is separate from revenue recognition:

• Immediate payout: You pay provider right away, but still recognize commission over time
• Monthly payout: You pay provider monthly, recognizing commission as service is delivered
• End of subscription: You pay provider after subscription completes

The cash payout timing doesn't change how you recognize your commission revenue.

Can I have different commission rates for different products?

Yes, commission rates are typically set at the product or plan level, allowing different rates for different offerings.

What happens if a customer gets a refund on an agency subscription?

Refunds on agency subscriptions are more complex:

1. You may need to request the money back from the provider (if already paid)
2. Your commission is reversed proportionally
3. The customer receives a refund of the full amount
4. Both your Deferred Revenue and Recognized Revenue are adjusted

How do I reconcile agency commission payments?

Track:

• Money collected from customers: Cash - Online/Offline Payments
• Commission earned: Recognized Revenue - Agency Commission
• Money owed to providers: Pass-through liability (tracked separately)
• Money paid to providers: Recorded when you make payments

The difference between money collected and money paid out (plus commission earned) should match your cash position.