A local bank was evaluating an asset-based loan collateralized by accounts receivable. The bank called on Skoda Minotti’s Transaction Advisory Services Group to conduct a review of the
loan applicant’s receivables.
In our assessment of the loan applicant’s receivables, we reviewed and tested many aspects of the applicant’s receivables:
- Gained a thorough knowledge of the applicant’s credit policy and collection procedures
- Reviewed overall revenue recognition, accounts receivable and cash collection processes and systems
- Computed and reviewed changes in agings over time
- Computed and reviewed roll forward statistics including dilution and turnover
- Reviewed for customer concentration
- Tested invoicing processes
- Tested credit memos application processes
- Tested cash application processes
- Performed a sales reconciliation by rolling accounts receivable forward to financial statements.
- Based on the bank’s criteria and the results of our diligence, our team calculated a recommended borrowing base.
Following our analysis, the bank brought our recommendation to the loan committee and the applicant was awarded the line of credit.
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