What actions are needed if your company acquired another, or consolidates and merges another business unit’s accounts receivable into your existing AR portfolio? How will this new workload be handled? What differences in business practices will you, as the Credit Manager, have to understand and deal with? There will be a number of uncertainties surrounding the collection effort required and risks associated with your new accounts..

Here is a starter list of suggestions that may help you transition this additional workload into your department:

1. Be part of the advance due diligence team evaluating an acquisition. Since Accounts Receivables are likely to be the target company’s largest or close to largest asset, it makes sense for you as the Credit Manager to be involved in the decision process. If you are not involved until after the decision is made, try to accomplish the following as early as possible. Meet with your counterpart and assess the file you will inherit carefully.

Here is a starter list of documentation and information you should try to obtain:

1. Credit approval policies.
2. Collection policies and strategies.
3. A thirteen-month history of month-ending aging bucket, revenue, and DSO results. This will give you insight into collections and past-due trends.
4. Access to the most recent detailed Aged Trial Balance. Use this to do a deeper dive to understand high dollar and past-due issues and slow-paying accounts.
5. Examples of critical documents such as invoices, credit memos, statements, sales orders shipping documents, documented payment arrangements, etc.
6. Identify potential bad debt balances. Review the credit files of customers of concern.
7. Ask for a list and account detail of all customers with open balances referred to a third-party collection agency or for legal action. 
8. Review the reserve for bad debt write-offs. Is it adequate?
9. Understand the standard terms of sale and any customer balances with extended terms.
10. Review long-standing past due isolated balances for potential escheatment risks.
11. Provide your management with your assessment. It is likely the final price paid for an acquisition that allows for bad debt AR adjustments.

The documentation needed to complete proper due diligence is situational and may be different for your particular situation or industry. You may want to check out a more detailed Checklist that is available in the Credit Today archives.