Statistical Analysis for Quick Stab Collection Agency

One assumption that should be clearly analyzed is that the collection period is of 30 days net. Not always customers have the ability and willingness to pay off their debts in 30 days, some may take more time, and some could incur in bad debt.

To consider this we need net credit sales and average receivable balance. This ratio indicates average collection period should be consistent with corporate credit policy. An increase suggests a decline in financial health of customers.

Although the company seems to be profitable, it has faced shortage of cash. It happened due to increase in Accounts Receivable as well as Inventories. On the other hand, Accounts Payable does not increase that rapidly and difficulties regarding cash collection become evident. Furthermore, the cash collection cycle becomes larger (59 days in year 2003, while more than 70 in year 2006).

In order to confirm the accounts receivable balances, I decided to use positive confirmations since this was my first time auditing the company and the collateral for the loan would be the receivables. The confirmations helped to verify the accuracy and existence of the accounts. I also calculated the Receivables Turnover Ratio in order to better evaluate the overall success of collection on accounts. The sample size that I chose was determined by the factors of tolerable misstatement, inherent risk, control risk, achieved detection risk

STATS 415 Data Mining Project Insights into the prediction of the default payment through the history of payments, the amount of previous payment and the amount of bill payment

For those long overdue outstanding that are not eligible for any financial assistance, after ample time of calling up the financial contact of the clients, sending out statement of the accounts and reminder letters, if the financial contact still failed to make payment for the outstanding, the cases will be refer to the debt collection agency. The successful debt recovery rate is high resulting in reduces of bad debts.

The use of credit reports is an essential step in establishing an appropriate credit-granting system. The presence of these reports would indicate that the control procedure is operating efficiently. If the reports are missing or

J reflects department store chain. This industry is a retail business; therefore, there is a large amount of inventories. This industry also has high accounts receivable because usually customers pay with credit cards which are billed at the end of the month. However, sometimes, customers forget to pay their bills on time, and the bills are brought to next month. Therefore, the collection period is approximately 2 months.

Moreover, from the analyse tab and the function “Age”, an aging of the Accounts Receivable was performed.

11. Accounts receivable turnover and days sales in accounts receivable for the last three years:

It is an indicator of managerial capabilities to effectively and efficiently utilize company’s assets (Mathur 2000). It includes analyzing the average collection period,

To determine the proportion of allowable amount on a customer, the company checks the number of days the debt has been pending before payment. Equally, financial conditions of the customers, macroeconomic factors and the weighted-average risk trend trends are considered.

Britvic PLC was compelled in 2007 to increase with approximately 10 days the period in which credit customers pay their liabilities, so that the impact of economic recession over the organisation’s profit was reduced by maintaining the drop in the level of sales at an acceptable level. One year later, in 2008, an 8 days decrease in his ratio was recorded, followed by a 2 days increase in 2009. As reported by their financial statements, the debtors’ days ratio has been stable for the past two years, a sign of recovery after the economic recession, but not as low as in the economic boom, characteristic for the 2005-2006 period.

Knowing what other outlying debts customers have could be helpful in determining high-risk customers. Along with past credit history this could be helpful in determining customers to reject.

The core problem for Allen Distribution Company is how to distinguish from the marginal accounts the difference between good creditors and bad creditors. Especially we show how the difference between creditors can be utilized in practice by the credit representatives. For this we provide clear guidelines. The option of extending the Morse Photo Company’s $ 1000 credit line is used as test case for these purposes.