Small business lending – Watch out for inflated receivables

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Abstract: In desperate attempts to secure loans in today’s conservative lending environment, some small businesses are artificially inflating their receivables on financial statements by postponing bad debt write-offs, stretching out revenue recognition cutoffs or even recording bogus sales. In other instances, small business staffs are stretched so thin that inadvertent errors in recording receivables are being made. Fortunately, bankers who conduct extra due diligence on receivables can sort fiction from fact and errors from accuracy. This article offers tips on how to do so.