Incentive schemes for credit controllers

[BigBoss]

Led to understand that credit controllers these days expect to have an incentive scheme incorporated into their package, I designed such a scheme.

It is based on a target that is easy to calculate on the basis of the entire ledger but difficult to split by clients. This means that for most months, the credit control team max out on their bonus.

I don't necessary wish to pay them any less bonus, but believe that the scheme is flawed.

Does anyone have a credit control incentive schemes that works for them. The current scheme is based on a notional "collectible debt" which due to the different natures of our clients can be fairly subjective to calculate accurately, but when generally applied over-awards.

Many thanks
BB

[Geoff T]

Have to say I HATE bonuses!

Invest the money in training, and motivating instead...

Credit controllers can easily become "Debt Collectors" by mistake when they're chasing bonus targets...

PS - if they're good at what they do...they should receive it...most months or not...proves they're doing it right!

Last - "collectable debt" is the reality...and yes, is subjective...but better than "they'll all pay, here's your new target":eek:

[Geoff T]

I don't necessary wish to pay them any less bonus, but believe that the scheme is flawed.

ps BB - just by the post - I don't believe you!

[BigBoss]

Ok, I do want to pay them less !

But (honestly) I would rather pay them more salary and knock the bonus scheme on the head, but everyone these days seems to be driven by the B... word. Almost as if the "Salary" bit is almost for just turning up in the morning.

[GRDCredit]

Hi BB

I am pushed for time now but will give my own views later this evening. However, please confirm you are not a one post wonder!

The obvious answer is of course to sack the lot of them and outsource your credit control!

If this is not an option couple of quick questions -

Do the credit controllers just chase money or are they responsible as well for raising invoices and credit notes?

How many of them are there in your organisation?

Do you sell a product or service?

Do they also manage the risk - i.e. agree opening of accounts?


Geoff

[maxine]

BB

I am pushed for time too to answer this properly too but think incentive schemes for credit controllers can be fantastic in terms of performance but depends what you want to achieve from it ie:

* Improve how quickly your payments come in
* Reduce the amount of money you may write off as bad debt
* Improve query management and customer service
* Increase sales :)

I am a big fan of split % schemes (but that will take some explaining) and also spot prizes.

I think the overall thing with incentive schemes for credit controllers is to keep it fresh and completely aligned with your business goals :)

[Geoff T]

Hi BB

I am pushed for time now but will give my own views later this evening. However, please confirm you are not a one post wonder!

The obvious answer is of course to sack the lot of them and outsource your credit control!

If this is not an option couple of quick questions -

Do the credit controllers just chase money or are they responsible as well for raising invoices and credit notes?

How many of them are there in your organisation?

Do you sell a product or service?

Do they also manage the risk - i.e. agree opening of accounts?


Geoff

:D - BB - for info that was quick!:rolleyes:

my short answer - 2 options:

option A - pay them better, get them trained + qualified...

"centre of excellence" type thing will mean you get/keep/retain the best...and gives easier way to remove deadwood

I'd rather see money every month - delivering the quality of work I do regardless(than a "maybe" bonus - so long as the postie's not on strike!:mad:)

...professional work = professional pay...

option B - outsource! :D

[BigBoss]

Hi BB

I am pushed for time now but will give my own views later this evening. However, please confirm you are not a one post wonder!

The obvious answer is of course to sack the lot of them and outsource your credit control!

If this is not an option couple of quick questions -

Do the credit controllers just chase money or are they responsible as well for raising invoices and credit notes?

How many of them are there in your organisation?

Do you sell a product or service?

Do they also manage the risk - i.e. agree opening of accounts?


Geoff

I will try to not be a one post wonder !

There are a total of 3 CCs, the scheme pays them as a team not as individuals.

We sell advertising space to media agencies, and the vast majority of our debt is with large companies.

The invoices/credit notes are raised independently and they don't open new accounts without relevant authorisation, although they do perform the credit checks/check trade references, etc...

[Geoff T]

easy option...

save money, pay on individual performance...can also 'factor in' the "chaseable" and other factors...

[maxine]

Couple more questions:

* What causes the most bad debt at the moment?
* What causes the most slow paying performance at the moment?
* What do you want to achieve each month/quarter? Is there a particular area of focus or is it just generally across the board?

To make an incentive feel like an incentive and not just a reward for turning up then maybe rewarding with a cash value isn't the best way. To make if feel like a bonus then maybe consider a pamper-day at a health resort or a team night out or something along those lines.

If people have got used to the bonus money as part of their regular income then you could have a difficult time on your hands :)

Maybe benchmarking credit controller salaries for your area or industry would be a good start so that you know in your mind what the going rate is if you were to recruit for a good person for this type of role (recruitment agency info can help with this).

Advertising is generally one of the higher credit risk industries to be in so there are two issues here... a) having a bonus scheme that rewards good credit risk decisions as part of the credit account application process but b) doesn't restrict sales by controllers being over-cautious in order to earn bonus.

A few ideas for you:

Split % Targets

If overall performance is what you want to reward then you could use a "split scheme" where you measure the % of debt that is between 0-60 days and the % that is over 60 days and set a target of say 80% 0-60 days. This will reward a lower percentage of aged debt but it may take the focus away from preventing newer debt from getting older.

DSO/Debtor Day Targets

You could reward the whole team for achieving a specified DSO/Debtor Day Target. You can bring this to life and make it quite buzzy by calculating what your DSO are at the end of one month and what you want it to be the next and then calculate a Cash Collection Target from that. Each day you can measure the amount of cash that comes in and what has been "promised" to have a daily tracking system in place of performance to cash target.

% Scores

This takes the value in each aged column and converts it to a % figure. You can then say what you want the % in each column to be and convert it into a score. This is good if there are individual ledgers in place (for each controller) but you don't want each of the controllers to know how much value is with another controller

Activity Targets

You might set targets against specific activity that you think would drive a performance improvement ie; number of collections calls made or number of customers signed up to direct debit.

Spot Prizes

This can be really good as it is a chance to keep fresh and reward specific behaviour or activities ie; the person to collect the most cash that day, take the biggest credit card payment, gets the most promises of payment, resolves the most complaints, allocates the most cash, recovers the most legal debt etc. They can be instant and fun ie; come into the office with a load of goodies on a Monday (High Street vouchers, chocolates etc) and then dish them out throughout the week. Spot prizes can be tailored as you go so you can respond to situations and not be stuck with a long drawn out scheme that is difficult to manage or not in line with business goals.

Duvet Days can be a great prize allowing someone to phone in and cash in on a Duvet Day which is extra time off work in addition to holiday allowance without prior booking. Extra half hour lunch break vouchers, or vouchers for extra tea breaks or leave an hour early also popular :)

If you let us know what you want to achieve in particular then I am sure between us we can come up with someone suitable for you :)

[Geoff T]

Has to be said Maxine...how is life in sales...?:p

Spot on as always BTW!:D:D;)

[maxine]

It's fab but you know I can't help reverting to type every now and then :p

[GRDCredit]

Sorry not to have replied last night as promised but I read Maxine's post and thought there was little point!

It is probably the MOG in me (miserable old git) but I hate bonus/incentive schemes and would tend to go for the competitive salary and occasional team night out/pamper event.

The problem of course with bonuses/targets for credit controllers is the danger that as a side effect it could turn them into 'sales prevention' people. You want these customers to pay quicker? OK, they all go on stop the day before they go overdue!

Personally I would go for the % route as describe by Maxine although have also used in the past, as a slight variation, the % of debt more than x days overdue. I would also be inclined to do it on a team basis and avoid the need to pay cash. Cash is wonderful when you are getting it but is a huge disincentive when it is taken away.

However, there is a case for operating an individual scheme if you feel that currently you are not getting the most out of your entire team. If one is earning a bonus and another is not that staff member is either going to improve or be out! - result on both counts :)


Geoff

PS Outsource!

[maxine]

It is probably the MOG in me (miserable old git) but I hate bonus/incentive schemes and would tend to go for the competitive salary and occasional team night out/pamper event.

The problem of course with bonuses/targets for credit controllers is the danger that as a side effect it could turn them into 'sales prevention' people. You want these customers to pay quicker? OK, they all go on stop the day before they go overdue!

Personally I would go for the % route as describe by Maxine although have also used in the past, as a slight variation, the % of debt more than x days overdue. I would also be inclined to do it on a team basis and avoid the need to pay cash. Cash is wonderful when you are getting it but is a huge disincentive when it is taken away.

However, there is a case for operating an individual scheme if you feel that currently you are not getting the most out of your entire team. If one is earning a bonus and another is not that staff member is either going to improve or be out! - result on both counts :)


Geoff

PS Outsource!

Geoff makes some really good points especially about incentives driving the wrong kind of behaviour if you are not careful ie; sales prevention. Similarly an individual performance scheme can have disadvantages aswell as advantages ie; people will only concentrate on their own work and not handle calls or cover for each other.

Handling the changes in an incentive scheme can also be a bit tricky as it can be a huge demotivator if people are used to getting payouts.

Perhaps you could introduce qualitative conditions to your current incentive scheme or make it a little bit tougher by measuring some of the admin functions.

And even though Geoff put the "PS Outsource" in small letters that might be a very worthy consideration to outsource part of the function so that you get a higher performance and focus will keeping costs the same :)

[GRDCredit]

Geoff makes some really good points

Have you been drinking! :)