Bonus for Accounts Receivable
WOCO Frank
496 Posts
I've been asked to redesign the bonus plan for our A/R manager. Currently, she goes into the year with a specified bonus potential. When the books close on that year, we simply deduct all the bad debt written off for the year and she gets the remainder as her bonus. I like it because it's simple, but unfortunately it isn't always fair, since the CEO is the one who decides what is written off.
We'd like the new plan to reflect account aging, since that is more within her control.
Do any of you have any similar bonus plans, or can you suggest another direction? We're wide open at this point, but I need to have something preliminary drafted at the end of next week.
TIA!
PS... I'll be cross-posting this in Wage & Hour also.
We'd like the new plan to reflect account aging, since that is more within her control.
Do any of you have any similar bonus plans, or can you suggest another direction? We're wide open at this point, but I need to have something preliminary drafted at the end of next week.
TIA!
PS... I'll be cross-posting this in Wage & Hour also.
Comments
Get Finance to tell you what amount of money is generated by reducing aging by one day. Look at what your average aging was for last year and use that as a bench mark. Let's say average days outstanding was 90. If she brings the average to 89, pay her some percentage of what the company makes by having that cash in hand. If she reduces it two days, double what she gets. You can pay monthly, quarterly or annually. Hope that helps.
Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
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