Tie Sales Commission To Collections

I recently did a post for BrightGauge on Past Due Invoices that got me thinking about this topic.

At Compuquip, we never had a bad debt problem.  The total dollars of receivables we wrote off in the 11 years I worked in the MSP group was less than $10,000.   In my opinion it was thanks to one reason: We tied sales commissions & bonuses to our collections process.

At Compuquip, if a customer paid after 90 days, the sales rep would lose their commission but was still obligated to collect on the invoice (it was in their contract so there was no surprises for anyone).  Whenever I spoke with an MSP that had receivables issue, I would inevitably suggest they tie commission to collections.  The MSP would usually freak out saying they would never want a sales rep also collecting, that it introduces a dynamic into the relationship that can confuse both the sales rep and the client.  

My common response was…. BULLSH*T (sorry mom)

Everyone in a FOR PROFIT business is in the business of making money and any client that couldn’t understand the collection part of that equation is probably a terrible customer.  If a business lost money, they would eventually go out of business and who wants that?  Not the client since they rely on their goods or services provided.  

In our experience we found that the sales rep is the best person to quarterback this.  They know the customer best and can determine who should follow up on an invoice and once an issue is uncovered quickly have it resolved.  Personally I went through the collection process hundreds of time and I finally perfected my message communication, here was my magic phrase:

“Hey Mr. Customer, I was just meeting with my management team and took some heat for some invoices that you haven’t paid yet.  Since any past dues come out of my commission, I need your help to guide me on how we can get this resolved.”  Then wait and let the awkward silence fill the air until they offer to help.

Any true partner will completely understand the personal connection of earning a fair wage and the collection of invoices. 9 out of 10 times this phrase would trigger action.  Hopefully, the action was getting paid but if not, it would at least uncover the challenge with getting the invoice paid.

If you’re having trouble with collections, try this out.  It will feel awkward at first and people will fight it (like most change) but at the end, it will work out for everyone.  

What unique processes do you have for collections?  Please share in the comments below…