Arellano University

Pas-asa St., Caniogan, Pasig City

School of Business & Accountancy

REMEDIAL ACCOUNT MANAGEMENT AND

SKIP TRANING

Jhonrex B. Rances

Credit and Collection

1st Sem., SY 2019-2020
 Chapter 1
OBJECTIVES OF REMEDIAL ACCOUNT MANAGEMENT

Remedial Account Management is one of the six (6) modules in this

comprehensive Course in Credit and Collection management designed by the
author.

The other modules are:

 Introduction to Credit and Collection Management
 Credit Investigation and Property Appraisal
 Credit Evaluation, Financial Analysis and Credit Decisions
 Collection Procedures and Techniques
 Remedial Account Credit Decisions
 Safeguarding and Enforcing Creditors Rights
Problem account

- It has been defined as one ‘in which there is a major breakdown in

the repayment agreement resulting in an undue delay in collection, or in which
there appears to be a potential loss. Because a problem account may
eventually turn into a bad debt if not properly handled, it must be given special
attention and thus the necessity of discussing this subject thoroughly’.
 Conformably and in pursuance of the primary and general objective of
credit and collection management which is to maximize profits and minimize
bad debt losses, the specific objectives of remedial account management re as
follows:

 To nurse substandard or doubtful accounts back to health

A firm or bank sometimes does absorbs such accounts,
maybe due to faulty credit processing and evaluation, or due to the
exigencies of the business.

example:
the firm must sell loanable funds, or that because of business
reverses, management or event acts of God, the debtor has subsequently
become a substandard or doubtful risk.
 To regularize credit and documentation deficiencies

As earlier discussed, ‘hurried’ credit decisions sometimes had to be

made, for some reason or the other. There is, therefore, the need to gather
more credit information on the debtor in order to find out exactly his credit
worthiness and credit rating. Should he turn out to be doubtful or substandard
risk, then remedial measures must have to be applied to save the account from
turning into bad debt. Or, sometimes due to oversight or haste, the supporting
documents of loan or credit extension are defective or deficient or event
absent. How to regularize these deficiencies and defects or absence is within
the realm of remedial account management.
 To strengthen weaknesses of the credit extension by way of
additional collateral, security or guaranty. In the course of the
repayment period, certain weaknesses of the credit extension
becomes evident. This may be due to faulty credit processing and
evaluation, changes in the fortunes of the debtor, unforeseen
adverse trend in the economy or particular business the debtor is
engaged in, or fortuitous events and other acts of God, which have
not been foreseen.
 To locate missing customers (skip training)
One principle headache of collection management is tracing the
missing customer. A customer may be missing intentionally or unintentionally. If
the disappearance is intentional to defraud creditors, then the task becomes
doubly difficult. Sometimes, though, a customer is missing, not intentionally but
because of transfer of residence or office.

 To anticipate debtor’s defenses.