PCM Financial Management & Reporting Flashcards

Which financial metric measures the percentage of total outstanding debt that a collection agency successfully recovers within a given period?

Answer: Recovery rate

Recovery rate measures the percentage of outstanding debt successfully collected and is a primary KPI for collection managers.

A collection manager reviewing the agency's P&L statement notices that cost per collected dollar has increased by 15% quarter-over-quarter. What is the MOST likely first step?

Answer: Analyze operational expense line items to identify cost drivers

Analyzing expense line items identifies which cost drivers are responsible before taking corrective action.

Which budgeting approach requires each department to justify all expenditures from scratch each budget cycle rather than basing the new budget on prior-year figures?

Answer: Zero-based budgeting

Zero-based budgeting requires all expenses to be justified anew each cycle, eliminating automatic carryover of prior spending.

A collection agency's Days Sales Outstanding (DSO) increased from 45 to 62 days. What does this indicate?

Answer: Clients are paying invoices more slowly or the collection cycle has lengthened

A rising DSO indicates it is taking longer on average to collect payment, signaling slower cash inflows or portfolio deterioration.

In collection agency financial reporting, which statement shows the agency's cash inflows from collections, operating expenses paid, and net cash position over a period?

Answer: Cash flow statement

The cash flow statement tracks actual cash inflows and outflows during the period, including collections received and expenses paid.

A collection manager must present variance analysis to senior leadership. A favorable variance on collector commissions means:

Answer: Commissions paid were lower than budgeted

A favorable expense variance means actual spending was less than budgeted, reducing overall costs.