| American corporations are struggling with renewed purpose to get every penny of profit out of their operations and to reduce their costs of doing business. Attention in this process is often focused on collections, and particularly on bad debt. Currently, however, this focus on bad debt most often occurs at the collection end, rather than on methods of predicting what customers are bad debt risks before credit or service are extended.;A review of the literature reveals that most corporations, including US WEST Communications, still use outmoded, "judgmental" methods of assessing creditworthiness. Other studies show the increased effectiveness derived from the use of "empirical" credit scoring methods of predicting bad debt. Studies at US WEST Communications show that the corporation could save millions of dollars by adopting an empirical method of credit evaluation, and various model evaluation systems have been proposed. The purpose of this study is to provide a method for increasing the effectiveness of any such model by incorporating within it the hypothesized correlation between fluctuations in the Bureau of Economic Analysis' leading economic indicators and levels of bad debt at US WEST Communications.;The data used in this study derive from two primary sources: the specific periodic reports of the status of the leading economic indicators from the Bureau of Economic Analysis; and information on the fluctuations in bad debt from US WEST Communication's bad debt tracking system, COBRA, for the same periods. The methodology of correlational research is used to test the hypothesis, with the software package known as the "Statistical Analysis System" used to perform the univariate procedure to test for data normality; an ARIMA procedure to identify what model (autocorrelation, inverse autocorrelation or partial correlation) provided the best "fit"; and an autoregression procedure to further test for significance.;Following the data tables, the results of the data analysis are discussed. The long-range consequences of the study are analyzed in terms of US WEST Communication's future amid increased competition. Recommendations for further related research are made, and finally, the impact of this study on the author's profession is analyzed. |
