When a seller closes a trade, the expectation is often that the reward will follow quickly. But in many companies there is a shift between the result and the payout. This delay is called lag time and it has more significance than many people think.
Lag time occurs because companies want to make sure a contract is realized before commission is paid. This can mean that commission is only released after the customer has paid the first invoice or when a certain period has passed without cancellation. Some organizations link the payout to fixed cycles, such as month-end or quarter-end.
Imagine a seller closing a $500,000 deal in March. The deal itself is confirmed, but the customer has a 30-day payment deadline. At the same time, the company has a policy of paying commissions only at the close of the month. The result is that the seller does not see the money until the end of April or May.
For the company, this creates security. For the seller, it feels like a barrier between effort and reward.
Motivation is often driven by quick feedback. The closer the commission is to the time of sale, the stronger the incentive works. A long lag hour can erode the effect of even the best commission model because the reward feels distant and uncertain.
If the employee does not even see the status along the way, the problem becomes greater. Uncertainty about whether and when the commission will be paid can create mistrust and lead to salespeople starting to keep their own spreadsheets.
Instead of removing layer hour altogether, companies can make it more transparent. With an automated system, sellers can see what they have earned and when it is expected to be paid out. The reward thus feels present, even if the money does not land until later.
Some organizations also choose to split the commission: a smaller portion is paid out at deal closing, while the rest is released when the customer has paid or reached a milestone. In this way, risk for the company is balanced with motivation for the employee.
Lag hour is more than just a technical detail. It's the difference between whether commission acts as a powerful incentive or is reduced to a delayed bonus. When the delay is made shorter or at least obvious to the employee, commission again becomes a driver of performance.