PCM Financial Management & Reporting Flashcards

A PCM candidate reviews an agency's contingency fee structure where clients pay 25% of amounts collected. If the agency collects $400,000 in a month, what is the gross revenue?

Answer: $100,000

At a 25% contingency rate, gross revenue is 25% × $400,000 = $100,000 earned by the agency.

Which internal financial control helps prevent fraud or errors in a collection agency by ensuring no single employee can complete a financial transaction alone?

Answer: Segregation of duties

Segregation of duties divides transaction responsibilities among multiple employees to reduce the risk of fraud or undetected errors.

Which collection performance benchmark compares the actual amount collected against the maximum collectible amount in a portfolio, expressed as a percentage?

Answer: Liquidation rate

Liquidation rate measures how much of the collectible balance was actually recovered, providing a realistic view of portfolio performance.

A collection manager uses 'roll rate analysis' primarily to:

Answer: Track the percentage of accounts moving from one delinquency stage to the next

Roll rate analysis tracks what percentage of accounts progress (or 'roll') from one delinquency bucket to a more severe one, helping predict future losses.

When preparing an annual budget, a collection manager should account for which seasonality factor that typically reduces consumer payment capacity?

Answer: Holiday season (November–December) typically increases right-party contacts but decreases payment rates

During the holiday season, consumers face increased spending and reduced discretionary income, leading to higher contact rates but lower payment rates.

Which method of evaluating a collection team's financial efficiency compares the revenue generated per full-time equivalent (FTE) employee?

Answer: Revenue per FTE

Revenue per FTE measures how much income each employee generates, enabling workforce productivity benchmarking and staffing decisions.