📬 Bonus structures for finance: What's the scorecard?

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Send me your stickiest CFO dilemmas (anonymously if you wish), and I might answer them in the Mailbag.

👉 Send me your questions by filling out this form.

Now, on to today’s Mailbag.

We’ve got some great topics. Here’s what’s on tap:

Now, let’s get into it.

Zack McCarty from Phoenix asked:

What incentive programs/bonus structures do other CFOs have in place for AR teams? What advice is out there to motivate AR teams?

Zack, I’ll take your questions in reverse order.

The best AR professionals I’ve worked with didn’t need to be “motivated” in the traditional sense. They wake up every day ready to go to war with bad debt. They treat DSO and credit exposure like something personal. Defensive. Relentless.

They’re wired that way.

Which is a long way of saying: this starts with hiring, not incentives. You can teach systems and processes. You can’t really teach tenacity, attention to detail, or the willingness to pick up the phone for the fifteenth time and still sound professional when the customer’s AP team tells you to f- off. If you’re having to work very hard to motivate your AR team, it’s worth asking whether you have the right personalities in the role.

Once you’ve got the right people, the next step is being very clear on what “good” looks like.

DSO is a fine management KPI, but it’s a terrible frontline motivator. Individual AR team members only really control one half of the DSO equation: adherence to agreed credit terms. They don’t control invoicing accuracy, disputes upstream, or commercial decisions.

So measure what they can control.

The metrics I like are deliberately simple:

You can break overdue into 7-day and 30-day buckets, but I generally avoid making that too visible in steady state. It sends the wrong signal that some lateness is acceptable. I prefer a much cleaner message: late is late, and our job is to drive it to zero.

“Days since last bad debt” is particularly powerful. If you’re 300 days clean, nobody wants to be the person who resets the clock.

These metrics are intuitive, visible, and directly connected to individual action. Everyone can see how their daily work moves the number in one direction or the other.

Once you’ve got that, celebrate it. Put it on the wall. Talk about it in passing. Reference it constantly. Simple metrics work because they’re easy to be noisy about.

Even as CFO of a multi-billion-dollar business, I always knew which frontline credit controller owned each of our top 20 accounts. If I saw overdue creep up on one of them, I’d pick up the phone and say, “Hey, just checking in. Anything I can do to help?”

That single call is one of the most powerful tools a CFO has. It ripples through the team fast.

After all that, yes, you can layer in incentives. Bonus components tied to overdue balances and bad debt metrics make sense. DSO, particularly for the AR manager and for controllers who influence credit decisions, also works.

But incentives are the last layer, not the foundation.

TLDR: Hire AR people who are naturally wired to hate bad debt, give them simple frontline metrics they actually control, make those metrics loud and visible, and only then layer in bonuses. Incentives don’t fix the wrong team, but the right team barely needs them.

Senior Analyst from Calgary asked:

We’re a large PE-owned company, formerly public. Frontline incentives are tied to operating profit (profit share) and performance metrics, but financial confidentiality means employees often don’t know their bonus until payout day. How can we balance confidentiality with transparent performance tracking to keep staff motivated?

This is a very common problem, and I’ve lived it myself.

I’ve worked in businesses where the board was adamant that financials could not be shared internally, but at the same time wanted frontline teams incentivized on total profit measures.

The short answer is: it doesn’t work.

And if you step back, it’s obvious why.

Let’s go back to first principles. A bonus scheme is meant to do three things:

Even in the best-designed schemes, it’s hard to balance company-wide performance versus individual objectives. There’s no perfect answer, and it’s always context-specific.

But once employees don’t even know how the business is performing, the whole thing collapses. You’ve stripped away the causal link between effort and reward. People literally cannot tell whether what they’re doing is moving the needle.

At that point, the bonus becomes a lottery. And lotteries are terrible motivators.

So in the setup you describe, the scheme might still work as a cost-hedging mechanism, but it’s largely useless as an incentive tool. That’s a poor return on what is usually a very expensive line item.

So what can you do?

Option one is to push for more transparency with the board. In practice, this is often very hard. These positions tend to be deeply held by one or two influential people, usually shaped by a prior bad experience. And to be fair, there are real risks. I’ve seen salespeople talk about internal profitability with customers and accidentally trigger re-tenders or give competitors leverage. So the caution isn’t imaginary.

Option two, and usually the most pragmatic, is to share performance against plan without revealing the full P&L. For example:

This preserves confidentiality while restoring the link between action, performance, and reward.

Option three is to abandon operating-profit-based incentives for frontline teams altogether and focus bonuses on KPIs where you can provide full transparency. Or run a hybrid, where part of the bonus is company-based, and part is driven by disclosed operational metrics.

But doing nothing is the worst option.

A bonus scheme is an investment in retention, engagement, and performance. If you’re spending that money anyway, why wouldn’t you structure it to maximize the behavioral impact?

TLDR: If employees can’t see how the business is performing, profit-based bonuses won’t motivate them. Either share performance vs plan in a controlled way or redesign the scheme, but don’t expect incentives to work without a visible scoreboard.

Burnt-out-CFO from London asked:

How do I break the cycle of an AP team struggling to work through a backlog & then struggling to keep on top of day-to-day vendor payments? We need process improvement, but we've been firefighting for a year with no capacity for it.

I’ve been there.

I walked into a CFO role with a serious AP backlog. It’s one of the nastiest treadmills in finance. The very backlog you’re trying to clear is the thing stopping you from fixing the underlying problem.

The first and most important question is this: do you actually know why you’re behind?

“Process improvement” is too vague. You need to be brutally specific about where the blockage really sits:

That diagnosis matters because the root cause often isn’t AP at all.

If the business is committing spend left, right, and center with no discipline, and AP is left trying to reverse-engineer what invoices relate to, that’s not an AP problem. That’s a purchasing and spending authority failure.

If that’s the case, you need to intervene hard and fast upstream.

Put a simple PO discipline in place immediately. If needed, take it off the AP team entirely at first. Require finance countersignature on POs so every cost has a clear commitment behind it. Make it explicit that invoices without a PO won’t be paid. If people commit spend outside the process, treat it as a governance issue, not an admin mistake.

Yes, this will cause noise. That’s fine. Noise is better than chaos.

If instead it’s a pure volume problem, then you’re kidding yourself if you think the team will magically catch up. You need temporary capacity to clear the backlog and parallel effort focused on removing the friction. Otherwise, you’ll just tread water forever.

Same logic if the bottleneck is at payment. Fix batching, approvals, bank cut-offs, and segregation of duties so payments flow predictably.

The key point is this: You can’t ask a firefighting team to redesign the fire station while the building is burning.

You need to create breathing room. That usually means short-term help plus someone explicitly tasked with fixing root causes, not just chewing through invoices.

There are plenty of automation and AP tools that can help, but technology only works once the process is clear. Don’t automate dysfunction.

TLDR: Break the cycle first. Then fix it properly.

A few of the biggest stories that every CFO is paying close attention to. This is the section you might not want to see your name in.

Forward this to the treasury department…

Stablecoins are on their way to Intuit; the software giant of Quickbooks & Turbotax fame. Yet more evidence that something big is happening in stablecoins for corporate treasury. In case you missed it, we covered exactly this unfolding chapter of technology in a recent Boardroom Brief post.

Not sure that “wait 18 months before notifying your customers of a data breach” is one of the commandments of PR crisis comms…

US accounting firm Sax suffered a data breach that exposed 250k individuals’ personal information, then waited over a year to notify customers.

Interesting to hear this CFO reflect on their AI experiments in the finance team.

ICYMI, here are some of my favorite finance/business social media posts from this week. In the words of Kendall Roy, “all bangers, all the time.”:

The more we use it, the less excited we become…

Let me know what you thought of today’s Mailbag. Just hit reply… I read every message.

In Saturday’s Playbook, we talked about how to make finance transformation stick once the adrenaline wears off and the project team has moved on. Check out the newsletter here.

Disclaimer: I am not your accountant, tax advisor, lawyer, CFO, director, or friend. Well, maybe I’m your friend, but I am not any of those other things. Everything I publish represents my opinions only, not advice. Running the finances for a company is serious business, and you should take the proper advice you need.