Bad debt

I know this is a whole lot to ask but I am desperate for the help, so if anyone could at least help answer part of the question I would be very grateful, thank you.
Assume that you work as an accounting manager and notice that the number of bad debt has increased significantly over the past year. Please discuss what factors might be yielding this result and how you would address the problem.
Pick any business and with this specific business in mind, can you discuss some possible “early warning signs” to indicate that this business needs to review its bad debt holdings. Thank you.

Wow, thank for this very in-dept response, this well greatly help me, your awesome; thanks again.

Some possible causes of increasing delinquencies are worsening economic conditions, lax standards for issuing credit, failure to enforce the standards and inadequate collection procedures.

The signs of trouble can be seen in the number of past due accounts and the length of time they are past due.

Any business that issues credit should closely watch the economy and be alert to changes, tightening the rules going into downturns and loosening them on the way out. Also giving terms to their customers is an effective method. Example: Increase your prices 5 percent and give your accounts 5 percent off if paid in 30 days, three percent 31-60 days and net invoice for 61 days or more.

I knew early on that I did not want to be in the debt collection business and I didn't want to be left holding any bags...

So my firm requires a 50% deposit at contract signing before we begin projects, 25% at design approval, and 25% plus any overage BEFORE final delivery of files to the printer/web launches/etc.

When these upfront terms were not conducive to the client's in-house accounting procedures, we work on retainer. We also work on retainer for long-standing clients... and we give them a break on our fee schedule and bump their projects higher in the cue in appreciation for them nurturing an ongoing relationship with us.

Our policies have never been problem. In fact, I think they've saved me a ton of headaches that I see other design/new media/marketing firms experiencing right now. Past due is not an option here, and that's well known. I think that's difficult to pull off if you're scared, running an inefficient or wasteful operation, or if you're undercapitalized.

We've got a no non-sense reputation: the client pays on time, and we deliver on time. We attract high quality, well-paying clients.

We have actually increased revenue by roughly 55% during the economic downturn, which is a HUGE blessing.

Assume that you work as an accounting manager and notice that the number of bad debt has increased significantly over the past year. Discuss what factors might be yielding this result and how you would address the problem.

The first thing to look at would be the economy. If there was an economic downturn this may explain the rise in bad debt. After that, I would look at the approval process of credit and collections. Then I would look for at any special financing events the company was holding to see if this was in direct correlation to the rise in bad debt.

Pick any business and with this specific business in mind, discuss some possible “early warning signs” to indicate that this business needs to review its bad debt holdings.

Early warning signs for any company would be an increase in credit sales and new accounts. As the accounts receivables goes up, the company has to assume the bad debt will rise as well and plan for it. Another early warning sign would be any type of special credit promotion that will increase sales and bad debt to customers with questionable credit.