Credit guru Thea Dudley has spent more than 30 years in LBM credit management. Now she's here to answer your credit and collection questions. Got a question for her mailbag? Contact Thea at [email protected]

Dear Thea,
Recently, we have been having discussions at my company around compensation for our credit team. Sales gets commissions plus a salary and we are thinking of something on those lines for our credit team, but we are not quite sure how to structure it. Do you have any idea what other companies do?
Signed, Sales can’t have all the fun in Saratoga

Dear Sales fun,What an outstanding idea! If I had only 10, no wait 5, even 1% of every past due dollar I have collected over the years I would be:

  • Running a self-financed horse rescue in Idaho or Montana;
  • Kicking back on a beach that does not get any hurricane activity; or
  • Bathing daily in a vat of well-aged wine.

Alas, since that is not the case, I donate to the underprivileged horses of America, am looking at pictures of a beach, and consider spilling wine on myself the equivalent of bathing in it.

I read your email, dear Reader, and must admit, I spent some quality time staring off into space, blissfully thinking of what credit manager life would be if we had a comp for collections package that works like the sales comp program.

Traditionally, credit people may get a yearly bonus based on any combination of percentages, something like say XX% for DSO, XX% for Sales%, XX% for bad debt recovery. It could be any combination. I always like to see a combination of sales and credit components to keep it in perspective. Sometimes it is the “pixie dust” method—no rhyme or reason.

Sales usually has a base pay and commission on sales. How would that look for credit? Base pay + commission on ??? Would it be every dollar collected over 30?? Commission goes up or additional percentage on money that is written off to bad debt but recovered? Percent of finance charges collected? How do you track it? What are the pitfalls?

I have not seen or heard of a commission for credit managers program that has worked successfully. Many discussions, a few false starts, but nothing that would be the official poster child for how to do it successfully.

SO, fabulous readers, I throw this one out to all of you. Can we help Sales Fun out and get some suggestions/idea’s/comments/commiseration that may help create a program? At least some things that may get those creative juices flowing.

Send your replies directly to me at [email protected]. All contributors will remain anonymous unless you have a desire to find fame (no fortune) for your contributions to improving life for credit managers everywhere!

Help a fellow credit manager out!