|
CONCENTRATION OF CREDIT RISK
|
12 Months Ended | ||
|---|---|---|---|
|
Sep. 30, 2011
|
|||
| CONCENTRATION OF CREDIT RISK |
The
Company maintains cash balances at banks in California and
Nevada. Accounts are insured by the Federal Deposit
Insurance Corporation up to $250,000 per institution as of
September 30, 2011. Financial instruments that
potentially subject the Company to concentrations of credit risk
are primarily trade accounts receivable. The trade
accounts receivable are due primarily from business customers over
widespread geographical locations within the LEC billing areas
across the United States. The Company historically has
experienced significant dilution and customer credits due to
billing difficulties and uncollectible trade accounts
receivable. The Company estimates and provides an
allowance for uncollectible accounts receivable. The
handling and processing of cash receipts pertaining to trade
accounts receivable is maintained primarily by three third-party
billing companies. The Company is dependent upon these
billing companies for collection of its accounts
receivable. The billing companies and LECs charge fees
for their services, which are netted against the gross accounts
receivable balance. The billing companies also apply
holdbacks to the remittances for potentially uncollectible
accounts. These amounts will vary due to numerous
factors and the Company may not be certain as to the actual amounts
on any specific billing submittal until several months after that
submittal. The Company estimates the amount of these
charges and holdbacks based on historical experience and subsequent
information received from the billing companies. The
Company also estimates uncollectible account balances and provides
an allowance for such estimates. The billing companies
retain certain holdbacks that may not be collected by the Company
for a period extending beyond one
year. Additionally, certain other billings’
channels consisting of billings submitted to LEC Processors through
third parties were discontinued. As such, a significant portion of
the receivables at September 30, 2011 and 2010 pertaining to LEC
service providers represent the holdbacks described
above.
The
Company has concentrations of receivables with respect to certain
wholesale accounts and remaining holdbacks with LEC service
providers. Three such entities accounted for 31%, 25%
and 20% of gross receivables at September 30,
2011. Three such entities accounted for 27%, 27% and 16%
of gross receivables at September 30, 2010.
|