IOFM Accounts Receivable Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The identification of potential customer credit problems is crucial for managing accounts receivable effectively. Signs such as frequent payment delays, multiple disputes, or sudden changes in payment behavior indicate financial instability or dissatisfaction on the part of the customer.

When a customer consistently delays payments, it signals that they may be experiencing cash flow issues or are struggling to keep up with their financial obligations. Multiple disputes can suggest dissatisfaction with the product or service received, which may also correlate with an inability to maintain financial commitments. Furthermore, any sudden changes in how a customer pays—such as moving from timely payments to late arrivals—can be a red flag that warrants attention.

Recognizing these signs early allows businesses to take proactive measures to mitigate risk, such as adjusting credit limits, requiring more stringent payment terms, or even reevaluating the customer relationship altogether. Understanding these indicators can significantly enhance the management of credit risk and improve the overall health of the accounts receivable process.