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A Cash Incentive Program for Collectors
by Michael C. Dennis M.B.A., C.B.F.
We were asked to recommend an incentive program for collection specialists. There are any number of models. The model described below is useful because it can easily be modified to almost any commercial collection environment.
Model: Bonuses are paid quarterly. They are based on individual collector performance as measured at the end of each month. Collectors are eligible for a bonus of up to 20% of their quarterly gross earnings.
The following calculations must be made each month end:
- The total past due as a percent of total AR
- Credits over 90 days as a percent of total AR
- Total debits and deductions as a percent of total AR
Assume the following hypothetical results:
- 10% [is past due]
- 1% [is over 90 day old credits]
- 4% [involves open debits]
Total 15%
Bonuses are paid using the following table:
A Score Of:
< 10% |
= 100% of the eligible bonus |
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10% to 12% |
= 75% of the eligible bonus |
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12% to 13% |
= 50% of the eligible bonus |
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13% to 14% |
= 25% of the eligible bonus |
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>14% |
= No Bonus |
In this example, the collector would receive no bonus since his or her total was greater than 14%. As mentioned above, the percentages and the bonuses can be modified in any way that makes sense to you and to your company.
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