Sharon Els sells security systems for Guardsman Security Co. Els has a monthly sales quota of $40,000. If Els exceeds this quota, she is awarded a bonus. In measuring the quota, a sale is credited to the salesperson when a customer signs a contract for installation of a security system. Through the 25th of the current month, Els has sold $30,000 in security systems. Vortex Co., a business rumored to be on the verge of bankruptcy, contacted Els on the 26th of the month about having a security system installed. Els estimates that the current contract would yield about $14,000 worth of business for Guardsman Security Co. In addition, this contract would be large enough to put Els "over the top" for a bonus in the current month. However, Els in concerned that Vortex Co. will not be able to make the contract payment after the security system is installed. In fact, Els has heard rumors that a competing security services company refused to install a system for Vortex Co. because of these concerns. Upon further consideration, Els concluded that her job is to sell security systems and that it's someone else's problem to collect the resulting accounts receivable. Thus, Els wrote the contract with Vortex Co. and received a bonus for the month. Do you feel that there is an ethical issue with this situation? If you were Els (the salesperson), how would you handle this scenario? If you were the accountant in charge at Guardsman, how would you handle the situation? What can the company do to protect themselves?
Sharon Els sells security systems for Guardsman Security Co. Els has a monthly sales quota of $40,000. If Els exceeds this quota, she is awarded a bonus. In measuring the quota, a sale is credited to the salesperson when a customer signs a contract for installation of a security system. Through the 25th of the current month, Els has sold $30,000 in security systems.
Vortex Co., a business rumored to be on the verge of bankruptcy, contacted Els on the 26th of the month about having a security system installed. Els estimates that the current contract would yield about $14,000 worth of business for Guardsman Security Co. In addition, this contract would be large enough to put Els "over the top" for a bonus in the current month. However, Els in concerned that Vortex Co. will not be able to make the contract payment after the security system is installed. In fact, Els has heard rumors that a competing security services company refused to install a system for Vortex Co. because of these concerns.
Upon further consideration, Els concluded that her job is to sell security systems and that it's someone else's problem to collect the resulting accounts receivable. Thus, Els wrote the contract with Vortex Co. and received a bonus for the month.
Do you feel that there is an ethical issue with this situation? If you were Els (the salesperson), how would you handle this scenario? If you were the accountant in charge at Guardsman, how would you handle the situation? What can the company do to protect themselves?
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