Designing Effective Compensation Programs
Keeping and motivating good talent is critical to business performance. Successful companies design their compensation systems to help them keep their best workers and encourage poor performers to either shape up or move on. Although the specifics of compensation practices may be strongly influenced by conditions within particular industries, most companies will find it useful to apply the following guidelines in designing their pay packages:

1. Gather information about pay ranges and rates of increase in the industry from trade associations and industry groups.
   
2. Calculate pay increases based on salaries during the previous year, not the current period.
   
3. Increase salaries at a slower rate than sales increase.
   
4. Identify top performers and reward them with a greater percentage increase than average.
   
5. Identify poor performers and give them an increase below the average.
   
6. Conduct an annual review of the compensation plan.
   

Ways to Improve Your Collection System

1. Develop rapport with customers’ accounts payable clerks.
   
2. Call customers before the due date to find out if the merchandise in satisfactory condition and to confirm that the invoice will be paid on time.
   
3. If payment has not been received on the due date, call immediately to find out when to expect payment.
   
4. Offer discounts for early payment. If the discount rate is less than the interest rate you pay your bank, you will be ahead.
   
5. Deposit payments in the bank promptly.
   
6. Review your credit policies regularly to ensure that they result in collection within a reasonable period and don’t antagonize good customers.
   
7. Assign responsibility clearly to billing and receivables clerks you can depend on and encourage them to pursue continuous improvement.