Suddenly, senior management is interested in A/R. Any idea
why?
Answer: After corresponding
with this reader, we learned he worked for a publicly traded company.
We believe that management in publicly traded companies will be taking
a much more active role in monitoring and managing A/R, credit risk and
bad debt reserves. Under Sarbanes-Oxley, the CEO and CFO of publicly
traded companies must attest to the accuracy of their company’s
financial statements. Since in many companies A/R is one of the largest
assets on the Balance Sheet, it is logical to assume that management
is going to be more interested in the way you are managing credit risk.
This is not necessarily bad news. It makes it more likely that your decisions
will not be overridden. It makes it likely that uncollectible balances
will be written off sooner rather than later. It makes it more likely
that your role in establishing the bad debt reserve will be one of the
more important tasks that you perform for the company – and Sarbanes-Oxley
makes it more likely that your independent auditors ask more questions
about the appropriateness of your bad debt reserves. |