What can be an effect of allowing debts to age without action?

What can be an effect of allowing debts to age without action?

• A. Increased likelihood of successful recovery
• B. Higher administrative costs
• C. Reduction in legal liabilities
• D. Improvement in relationships with debtors

Answer: (B)

The choice indicating higher administrative costs as an effect of allowing debts to age without action is correct because as debts remain unresolved over time, they tend to accumulate additional charges, penalties, and interest. Furthermore, prolonged aging of debt can lead to more intensive administrative efforts required to manage and attempt collection on those debts. This increases the workload for personnel involved and may require additional resources to track and communicate with debtors, thus raising overall administrative costs. In addition, organizations may also find themselves needing to employ external collection agencies or legal counsel to recover aged debts, which incurs further expenses and resource allocation. The inefficiencies and heightened complexities involved in managing old debts contribute directly to the rise in administrative costs.

The choice indicating higher administrative costs as an effect of allowing debts to age without action is correct because as debts remain unresolved over time, they tend to accumulate additional charges, penalties, and interest. Furthermore, prolonged aging of debt can lead to more intensive administrative efforts required to manage and attempt collection on those debts. This increases the workload for personnel involved and may require additional resources to track and communicate with debtors, thus raising overall administrative costs.

In addition, organizations may also find themselves needing to employ external collection agencies or legal counsel to recover aged debts, which incurs further expenses and resource allocation. The inefficiencies and heightened complexities involved in managing old debts contribute directly to the rise in administrative costs.