What's going on when the rate of payment slows?(selected topic)(debtor and creditor management)

A general slowdown in a customer's payment rate can be a warning sign of fraud. If the account paid its bills on time, but suddenly falls behind, it can be a sign that something other than temporary financial difficulties are afoot, particularly if the business demonstrates other warning signs of fraud.

Without warning, creditors began noticing a slowdown in payments from Later Alligator Wholesale House, Inc., a wholesaler of general merchandise. Earlier in the year, the firm had placed unsolicited orders with manufacturers for items as diverse as ceramic picture frames and adult video cassettes. Upon checking trade sources, credit managers learned that Later Alligator's recent payment record showed a heavy past-due situation. Two suppliers had placed the account for collection, and several others had received NSF checks or checks on which a Stop Payment had been placed. Despite the downward trend, creditors also learned from their sources that suppliers had made credit sales to the firm within the last 30 to 60 days.

By late spring, Later Alligator's creditors were sending letters by mail, e-mail and telegrams demanding that their accounts be settled. The company's principal sent out a form letter to those creditors, which proposed a repayment arrangement. The letter advised suppliers that Later Alligator was experiencing difficulty in collecting their own ...