Being on the lookout for deceivable receivables

Description

Abstract: Next to cash, receivables are the most trusted source of loan collateral. But face value might exaggerate the truth. To protect against deceivable receivables, it’s important that lenders compare a borrower’s receivables to expenses to look for fictitious sales, and investigate journal entries that occur after the end of the accounting period. They should identify and monitor customers with too much concentration risk, and go beyond the financial statement to look at supplemental schedules, in addition to taking other proactive measures. When a borrower suffers from poor collections, there are specific actions a lender can take to help correct the situation.