The principal is the entity that offers the merchandise on commission; and the entity that receives said merchandise, is in charge of making the sale and earns a commission is called a commission agent.
Commodities on commission can be an ideal opportunity for those people or companies that want to specialize in the sales process of a product, without investing effort in the procedure associated with the purchase of a merchandise.
They can also be an opportunity for the clients, who will be in charge of buying or manufacturing products but will not have to dedicate resources directly in the process of selling a merchandise.
The goods in commission are the property of the principal; The commission agent will only have the right to sell the products, but these will not be part of his inventory as his own products.
However, it will be necessary for the commission agent to record in accounting all the movements related to the commercialization of the merchandise in commission, because it will be accountable to the principal.
The accounting record of the merchandise in commission is very important because, in addition to being necessary to inform the client about sales, it allows the commission agent to have insurance that supports his work and allows him to have access to the commissions that correspond to the sale of each product.
There are different rights and duties that both the commission agents and the principals must comply with.
Most relevant characteristics of the goods in commission and their main actors
The commission agent reserves the right to accept
The commission agent will always have the possibility to reject a merchandise on commission. You can do it for whatever reasons you consider appropriate: since you do not have personnel to carry out the sale at any given time, or you do not have space to locate the merchandise.
The commission agent does not require legal authorization
It is not necessary to create a power of attorney that enables the commission agent to sell the principal's products.
It is enough to have a verbal or written approval, without having to be a registered or legalized document.
The commission agent agrees to sell the merchandise
In the event that the commission agent accepts the merchandise on commission, he undertakes to sell it.
The conditions of the agreements may vary depending on the commissioners and the clients, but generally the former must undertake to carry out the sale of all the merchandise.
The merchandise is not the property of the commission agent
Although the commission agent has the task of selling the merchandise on commission, it does not belong to him, but to the principal.
Therefore, the profits generated from the sales of said merchandise are the property of the client.
Only the commission agent can make the sale
The principal entrusted the commission agent with a certain merchandise on commission. Then, the commission agent is the only one who must be in charge of selling said merchandise. It is inappropriate for the commission agent to give the task of selling the products to another company or person.
The commission agent can negotiate the merchandise
Although he does not have the right of ownership of the merchandise on commission, the commission agent does have the freedom to sell said merchandise, even negotiating on it, taking into account the conditions given by the principal at the time of consignment.
The commission is usually a percentage of the sale
The most common is that the value of the commission corresponds to a percentage of the sale of the merchandise. Prior to the consignment, the client will indicate to the commission agent what will be the percentage of the commission that he will receive for each sale.
The commission agent must follow the instructions of the principal
When the principal grants the merchandise in commission to the commission agent, instructions are established regarding the sale of the products.
These instructions will determine the form of payment that will be accepted, the type of discounts that can be made, the reasons that support possible returns, among other aspects.
Periodic accountability
The commission agent must present a report to the client, generally every month, in which he describes in detail the status of the sale of the merchandise on commission: how many products were sold, how many were returned and the reasons why these returns occurred, what additional expenses were generated, among other information.
The commission agent represents the principal to the buyers
Since the commission agent is the one who makes the sale, this is the representation of the principal in the eyes of the buyers.
In the event of any inconvenience or irregular situation, the buyers will contact the commission agent.
Safeguarding the product is the responsibility of the commission agent.
Among the things to which the commission agent is committed, the conservation of the merchandise on consignment stands out.
If there is any damage to the merchandise, the commission agent is the one who must respond to these defects.
The income is remitted in favor of the principal
As explained above, the merchandise on commission is the property of the principal, not the commission agent.
Therefore, all the income received from the sale of the merchandise on commission will be reflected in the accounting in favor of the client.
The principal is responsible for expenses associated with the sale
It is the responsibility of the client to assume expenses that may be generated from the sale of the merchandise on commission.
These expenses can be related, for example, to additional office supplies or customer fees.
The commission agent keeps separate accounts
The commission agent will reflect the movements related to the sale of the merchandise on commission separately from the movements of the sales of its own products, since the merchandise on consignment is not its property.
Taxes of the merchandise are assumed by the client
The taxes associated with the merchandise in commission are paid by the client, since he is the owner of said merchandise.
Commission taxes are borne by the commission agent
On the other hand, the commission agent must assume the taxes that may be generated from the commission obtained from the sale of the merchandise on consignment.
