Question

Provide an analysis why the following warning signs of Potential Credit and Collection Problems?

1. Numerous inquiries about one of your accounts.

2. Customer switches banks frequently.

3. Client asking for clarification or proof of service more frequently.

4. Changes in client payment patterns.

5. Partial payments rather than payment in full.

6. Problems in the client’s geographical area.

7. Problems in the client’s industry.

Answer 1

1. Numerous enquiries about one of the accounts of the client will mean that the client is involved in undisciplined payments of his debts so it will cast a doubt on his payment ability.

2.if customer is changing the bank frequently it will mean that he is trying to to gain from different banks and his not disciplined in payments

3. If the client is asking for clarification or proof of service more frequently than there is an element of distrust between client and the service provider so that needs to be resolved

4.if there is a change in the client payment pattern it would mean that the client is not consistent in the payment made to the service provider

5.if there is a partial payment rather than payment in full it will mean that the client does not willingly wants to repay whole of debt in one go.

6.problems in clients geographical area would also mean that the client is not able to pay Due to certain natural factors

7.problems in client industry will mean that these are macro risk that client cannot be escaping so the service provider will be exposed to such risk and he will have the problem in collections.