Reference no: EM13864453

The Atlas Corporation rents and sells furniture and appliances to individual consumers. The company's primary market focuses on renters who buy furniture and appliances by "renting to own." That is, the customer pays a rental charge (which includes 28% interest charges) for a specified time and, at the end of that contract, owns the furniture. Atlas maintains its own credit department and charges a high rate of interest (28%) for these contracts.

Over the past couple of years, the company has experienced a problem in collecting customer payments in a timely manner and, as a result, has seen a sharp drop in profitability. The effect on profitability is such that Atlas Corporation is now paying higher interest to its bank (8%) to carry its own indebtedness.

Management at Atlas wants the Accounts Receivable Department to increase its collection of past due bills. It has turned to you in the Human Resource Department to develop a system to incent and reward the Accounts Receivable Clerks for increasing the dollars in collections each month. Each A/R clerk is paid as a non-exempt hourly employee.

Applying what you know about what makes incentive and rewards effective, think through the process of designing an incentive and reward program for Atlas. Identify any issues that must be addressed. The information in the table below provides the previous year's results ("Monthly Total" means the amount due but NOT collected in that month).