Free PCM Credit & Account Management Questions and Answers

Question 1

What is a key factor in evaluating a customer’s creditworthiness?

Accepted Answer

Credit history and payment patterns

Answer

A customer's credit history and payment patterns are the most reliable indicators of their creditworthiness. This information provides a clear record of their past financial behavior, demonstrating their ability and willingness to meet financial obligations. Evaluating these patterns helps assess the risk associated with extending credit and informs decisions about credit limits and terms.

Question 2

What is a common method for managing accounts receivable?

Accepted Answer

Regular invoicing and follow-up

Answer

Regular invoicing ensures that customers are promptly aware of their financial obligations, while consistent follow-up for overdue accounts is crucial for maintaining cash flow and reducing the likelihood of bad debt. This proactive approach keeps accounts receivable current and signals to customers that payment terms are enforced. It establishes clear expectations and encourages timely payments.

Question 3

Which report provides a summary of a customer’s outstanding balances and payments?

Accepted Answer

Account aging report

Answer

An account aging report categorizes a customer's outstanding invoices based on how long they have been overdue. This report provides a critical summary of outstanding balances, payment history, and the age of each debt, allowing collection managers to prioritize efforts and identify accounts requiring immediate attention. It is an essential tool for managing accounts receivable and assessing collection risk.

Question 4

What is the purpose of setting credit limits?

Accepted Answer

To control risk exposure

Answer

Setting credit limits is a fundamental practice in credit management designed to control the financial risk a business undertakes when extending credit to customers. By establishing a maximum amount of credit, companies can limit potential losses from non-payment and ensure that customers do not accumulate unmanageable debt. This helps maintain financial stability and protects the business from excessive exposure to bad debt.

Question 5

Which action should be taken when a customer consistently misses payments?

Accepted Answer

Review and adjust credit terms

Answer

When a customer consistently misses payments, it indicates a potential change in their financial situation or an inability to meet their current obligations. Reviewing and adjusting credit terms, such as reducing the credit limit, requiring upfront payments, or offering a structured payment plan, is a proactive step to mitigate further risk and help the customer manage their debt. This approach aims to recover outstanding amounts while potentially preserving the customer relationship.

PCM - Professional Collection Manager Certified Practice Test

PCM - Professional Collection Manager Certified Practice Test

Free PCM Credit & Account Management Questions and Answers