Collection Risk Scorer

What it does

It takes customer-level receivables and payment history and reduces each account to four outputs: DSO, a 0-100 collection risk score (lower = better), an estimated PD (probability of default) and an IFRS 9 expected credit loss (ECL). The flow mirrors a credit & collections analyst. First the AR Aging Schedule places every open invoice into five overdue buckets (current / 1-30 / 31-60 / 61-90 / 90+); bucket weights form the aging-based risk base. DSO = (Avg AR / Credit Sales) × Days is computed and benchmarked against Best Possible DSO to report the collection inefficiency gap in days, with CEI (Collection Effectiveness Index) added when data allows. The base is then adjusted by an RFM-AR behavioral modifier (recency / frequency / severity of lateness) and a 5 C's of Credit qualitative modifier (Character, Capacity, Capital, Collateral, Conditions) to produce the final score. An IFRS 9 provision matrix applies a typical loss rate per bucket to estimate expected loss and customer PD, while Pareto / ABC (80/20) isolates the accounts carrying ~80% of risk-weighted receivables into a "call these first" list. Numeric integrity is checked (Σ buckets = total AR); an uncalibrated matrix or missing input is written explicitly to gaps — no fabricated numbers.

When to use it

• You have an AR aging list and need to know who is high collection risk and what to do.
• DSO is deteriorating, cash is tight, and you must set a bad-debt provision.
• You're deciding a credit limit or terms for a new or existing customer.
• You want single-customer or full-portfolio risk scoring, escalation priority and an ECL provision recommendation.

Method / frameworks

• AR Aging Schedule — overdue buckets + inter-bucket roll-rate as an early-warning signal.
• DSO / BPDSO / CEI — CRF working-capital definitions; inefficiency gap and collection effectiveness.
• IFRS 9 ECL — trade-receivable simplified approach + lifetime ECL provision matrix (ECL = EAD × PD × LGD), historical loss rate adjusted for forward-looking macro factors.
• 5 C's of Credit — qualitative modifier across Character / Capacity / Capital / Collateral / Conditions.
• RFM-AR — receivables version of RFM: Recency / Frequency / Severity.
• Pareto / ABC (80/20) — risk-weighted concentration → action priority.