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ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions

A company's sales team is paid commission on orders taken, regardless of whether customers pay. The finance director is concerned about rising irrecoverable debts. Which action would best address the conflict between the sales and finance functions?

Paying commission only on cash received, combined with credit checks before orders are accepted, best resolves the conflict. It aligns sales staff incentives with the finance aim of avoiding irrecoverable debts without abandoning credit sales, unlike cash-only trading or higher commission.

  1. APay commission only when the customer's cash has been received, and apply credit checks before accepting ordersCorrect
  2. BRemove all credit terms so that only cash sales are accepted
  3. CIncrease the sales commission rate to encourage more orders

Explanation

Linking commission to cash collected and using credit checks aligns sales incentives with the finance aim of limiting bad debts while keeping sales. Removing all credit terms would probably damage sales and customer relations, and higher commission would worsen the problem.

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