You notice that your accounts receivable days outstanding has doubled in the first 6 months. Do you give someone a bonus or put him or her on probation? Why?
To determine whether to give someone a bonus or put them on probation due to a doubling of accounts receivable days outstanding, you would need to gather more information and assess the reasons behind this increase. Here's how you can analyze the situation:
1. Identify the cause: Start by investigating the factors that have contributed to the increase in accounts receivable days outstanding. This may involve a review of sales practices, customer behavior, credit policies, billing processes, or collection efforts.
2. Evaluate employee performance: Determine the extent to which the individual in question has a role in the increased accounts receivable days outstanding. Assess their responsibilities, performance metrics, and specific areas of influence related to accounts receivable.
3. Consider other factors: Look at external factors that may have impacted the situation, such as changes in industry dynamics, economic conditions, or customer preferences. Evaluate whether these factors played a significant role or if the increase can be attributed primarily to internal factors.
4. Assess efforts to minimize impact: Examine whether the employee in question has taken steps to mitigate the increase in accounts receivable days outstanding. Consider their responsiveness, problem-solving skills, and communication with customers and internal stakeholders.
5. Determine accountability: Based on your analysis, determine the degree of accountability the employee holds regarding the increased accounts receivable days outstanding. Evaluate whether their actions, decisions, or performance directly contributed to the issue.
6. Identify improvement potential: If the employee is found accountable, assess their ability and willingness to learn from the situation. Identify areas for improvement, and consider if additional training, support, or mentoring could help them rectify the situation.
7. Weigh the potential impact: Assess the severity of the issue and the employee's overall performance within the organization. Consider the significance of the increase in accounts receivable days outstanding, its impact on cash flow, and the employee's overall track record and contributions.
Based on these considerations, you can make a more informed decision on whether to give the employee a bonus, put them on probation, or implement any other suitable action. It's important to adopt a fair and transparent approach while communicating any outcomes or decisions to the employee.