10 ways customers cook their books to get you to extend credit

The recent convictions of two former top corporate officers at Enron are yet another reminder to credit professionals of the ways business customers can practice "aggressive accounting" to mask underlying financial weakness or artificially inflate their income. Dubious asset valuations, of...

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Bibliographic Details
Published in:	IOMA's Report on Managing Credit, Receivables & Collections Receivables & Collections, 2006, Vol.6 (6-07), p.5
Format:	Newsletterarticle
Language:	eng
Subjects:	Accounting Accounting irregularities Accounting procedures Balance sheets Bank fraud Credit management Credit managers Customers Financial analysis Financial statements Leases Management Methods Prevention Revenue recognition Risk management Sales
Online Access:	Get full text
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Summary:	The recent convictions of two former top corporate officers at Enron are yet another reminder to credit professionals of the ways business customers can practice "aggressive accounting" to mask underlying financial weakness or artificially inflate their income. Dubious asset valuations, off-balance-sheet liabilities, and manipulation of the numbers of newly acquired companies are just some questionable or illegal practices that have come to light recently. Credit managers can take steps to protect their companies against customers using such practices to lure creditors into extending them more credit than they actually merit. The first step is to learn to recognize such sleight-of-hand - allowing you to then take appropriate action. The most common manipulative techniques and actions to guard against them are discussed, and include: 1. abusive revenue recognition procedures, 2. stuffing the channel, 3. questionable asset valuations, and 4. off-balance-sheet liabilities.
ISSN:	1074-8903