Tying bonuses to the age of accounts receivables to speed up collections.
When collections slip, the last thing you want to do is give customers a reason not to pay you. "Unhappy customers tend to stretch their payments or not pay at all," says Craig Tysdal, vice-president of sales for Network Equipment Technologies. To bolster customer service and get payments in the door, NET pays sales managers bonuses based on the age of accounts receivable.
Twice a month, the Redwood City, Calif., company publishes a profile of receivables, broken down by region and district, that shows which accounts are current and which are 30, 60, or 90 days old or more. The bonus, paid quarterly, is determined by how well managers meet goals for each level of the aging schedule. The more the sales manager exceeds the goals for a particular level, the larger the bonus he receives. Tysdal reports that since the bonus system was set up, a year ago, the number of receivables that are more than 90 days old has been cut in half.