Accounts receivable are too high for Branch A in Exhibit 12.16. One sales analyst recommends giving credit and collection responsibilities to the sales force. Sales reps would be provided with delinquency objectives aimed at reducing accounts receivables by 20 percent. Those meeting their objectives would earn an additional 1 percent of sales for commission. Will this work? Another analyst contends that since the sales force has no training in credits and collections, accounts receivable should be excluded from ROAM calculations. Do you agree? What would happen to Branch A'sBranch A's ROAM if accounts receivable were excluded?
Will this work?
Well, it will work to reduce delinquencies but it might make sales drop. It pays the reps for not taking any credit risk and so they may require cash on delivery (COD) making payment assured but cutting out many worthy credit customers. So, it might work but still be a bad strategy because although ...
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