Financial Management for Project Managers Accounts Payable/Receivable 5

Question 1

A project's largest customer consistently pays 45 days late. What is the best long-term solution?

Accepted Answer

Renegotiate contract payment terms or add late payment penalties

Answer

Write off the receivable each quarter

Answer

Stop invoicing the customer until they pay

Answer

Transfer the account to a collection agency immediately

Question 2

In project financial management, what is a retainage clause in accounts receivable?

Accepted Answer

A percentage of each payment withheld until project completion as a performance guarantee

Answer

A penalty for early contract termination

Answer

A fee charged for storing project deliverables

Answer

A discount offered for early payment

Question 3

Which approach best helps a project manager reduce the risk of bad debts in accounts receivable?

Accepted Answer

Conducting credit checks before extending credit to new clients

Answer

Extending credit to all customers without review

Answer

Invoicing customers only after full project completion

Answer

Recording all revenue as cash immediately

Question 4

A project manager discovers that the same vendor invoice was paid twice. Which internal control failure most likely allowed this?

Accepted Answer

Lack of a three-way match process

Answer

Insufficient vendor diversification

Answer

Absence of a project charter

Answer

No segregation of budget and schedule duties

Question 5

When a project uses milestone-based billing, how does this affect accounts receivable timing?

Accepted Answer

Invoices are issued only when defined project milestones are achieved

Answer

Revenue is invoiced continuously as work is performed daily

Answer

The client pays the full contract amount upfront

Answer

Invoicing occurs monthly regardless of project progress

Question 6

A project manager is calculating working capital. Which of the following correctly describes the relationship between AP and working capital?

Accepted Answer

Increasing AP decreases working capital because it raises current liabilities

Answer

Increasing AP increases working capital

Answer

AP has no effect on working capital

Answer

Decreasing AP increases working capital

Question 7

Which of the following is the most effective way to accelerate cash collection from accounts receivable on a project?

Accepted Answer

Offer early payment discounts and send invoices promptly after milestones

Answer

Send invoices only at project completion

Answer

Allow customers to set their own payment schedules

Answer

Reduce the number of invoices issued per quarter