How can a small business owner or their accountant tell whether a salesperson is being paid commission on sales that were made up, inflated, or returned or cancelled after the commission was paid, or at a higher rate than agreed, and how do you stop it?

What should I check, step by step?

1. Get the written commission plan for each salesperson: what counts as a sale, the rate, when commission is earned, and what happens to commission on returns, cancellations, credit memos and unpaid invoices. If there isn't one, write it before the next payout.

2. Rebuild last quarter's commissions yourself (or have your accountant do it) from the plan and from the sales report, not from the commission figure payroll was given. Any gap between the two needs an explanation.
3. Compare each person's commission with their collected sales, not just their booked sales. Commission rising while collections stay flat, or a growing pile of unpaid invoices on one person's accounts, is the classic sign.
4. Run returns, cancellations, credit memos and write-offs by salesperson for the 30 to 90 days after each payout. Sales that reverse soon after the commission is paid point to sales made only to be paid on.
5. Look at sales booked in the last days of a period, especially to new customers the salesperson set up themselves, and at sales that later moved from one rep to another.
6. Separate the jobs: the person who sells shouldn't also create customers, record their own sales adjustments, change commission rates or run payroll. Rate changes and plan changes go to you for approval.
7. Call a small sample of customers on recent commissioned sales to confirm what they ordered and kept.
8. Keep a dated record of each approved plan, rate and payout outside the payroll and commission system, so a later change to a rate or a sales figure stands out.
9. If you find a problem, talk to your accountant and an employment lawyer before confronting anyone or recovering money from pay; what you can take back depends on the written plan and your state's wage law.

How do salespeople inflate their commissions with fake, inflated or reversed sales?

The ACFE's 2026 fraud tree lists commission schemes as one of three payroll schemes, alongside ghost employees and falsified wages. The Fraud Examiners Manual, as quoted in the ACFE's Fraud Risk Exposures guide, explains that a commissioned employee's pay rests on two factors, the amount of sales generated and the percentage paid on them, so there are two ways to inflate it: falsify the amount of sales or increase the rate of commission.

• A 2001 CPA Journal case review describes the sales side: the person creates fictitious sales by tampering with sales orders, purchase orders, credit authorizations, packing slips and other documents, or more simply by ringing them up on a cash register. One of its cases was a salesperson in a clothing store who rang up sales to an accomplice, split the commission check with them, and then returned the purchased items.
• That last pattern is why returns after payout matter so much. If commission is paid on gross sales at the time of sale and nobody links later returns or cancellations back to the person who was paid on them, the business pays commission on sales it never kept.

Why do you need a written commission plan to check a salesperson's commission?

You can only say a commission is wrong if there's an agreed way to work it out. In California, Labor Code section 2751 requires that when an employee's pay involves commissions, the contract be in writing and set out how commissions are computed and paid; the employer must give each employee a signed copy and get a signed receipt for it. Other states have their own rules, but the same document is what any recalculation is checked against.

• A good plan says when a commission is earned (on order, shipment, invoice or payment), how returns, cancellations, credit memos and bad debts adjust it, and who can change a rate. A plan that only says a percentage of sales leaves room to argue about every reversal.
• Keep each version of the plan, with its date and your approval, so that a rate in the payroll system can be compared with the rate you actually agreed.

What does the ACFE 2026 report say about payroll and commission fraud?

Occupational Fraud 2026: A Report to the Nations covers 2,402 cases. Payroll schemes, which the report defines as an employee causing their employer to issue a payment by making false claims for compensation, appeared in 227 cases (10%), with a median loss of USD 63,000. The report doesn't break commission schemes out from other payroll schemes.

• Payroll schemes lasted a median 13 months before detection, at a median velocity of about USD 4,800 of loss per month.
• They were more common at small organizations: 13% of cases at organizations with fewer than 100 employees against 8% at organizations with 100 or more.