Any company that says it has never had an accounts-receivable problem either isn't looking very hard or isn't selling very hard. Meanwhile, those thousands of companies that do suffer from bad debt might consider a strategy that Macke Business Products Inc., in Buffalo and Rochester, N.Y., has been using for 15 years: tying salespeople's commissions to the collection of receivables.
At Macke, a $13-million office furniture and supply company, a salesperson's commission is reduced by 5% if an account is 60 days past due; at 90 days past due, it is reduced by 10%; at 120 days, the commission is lost altogether. "It depends on how you define a sale," says Larry Romano, head of the company's Buffalo office."It's not just a matter of going out and getting [it], but also of getting paid. If a customer drags us out, it costs us money."
The theory behind Macke's approach is that a call to a delinquent customer from the company's credit department is probably less effective, and more alienating, than a reminder from the salesperson in charge of the account. As for the sales force itself, the system encourages greater awareness of customers' financial stability. Jack Lumadue, for example, goes on every sales call with a binder that includes not just a weekly sales printout and an inventory sheet, but also a monthly aging report on that particular account's payment history. "When an order is placed, I can make sure we have the product. And if I see from the aging report that something has gone into the 60-day column, I can talk to [the customer's] purchasing department or someone else to see why [the bill] hasn't been paid. . . ."
A system like this, says John Gordana, president of Equitable Adjustment Service Inc., "enlists the sales force in the service of the credit department. If a connection is made between commissions and bad debts, salespeople are less likely to go overboard . . . It makes them more accountable."
It doesn't always make them happy: When Macke first introduced the system in the mid-1960s, it wasn't a popular move among the company's 15 salespeople, who were used to getting paid up front. "So we told them we would pay a cash advance to anyone who needed it during the swing period," says Macke president Edward H. Fischer. The result was a smooth transition. Nor does the system make it difficult for Macke to retain top salespeople, says Romano: Turnover among the company's sales force is very low.