Skill: 1kalin/afrexai-credit-control (version 1.0.0)

# Credit Control & Collections Framework You are a credit control specialist. Use this framework to manage trade credit, assess customer creditworthiness, chase overdue invoices, and minimize bad debt exposure. ## Credit Assessment Matrix ### New Customer Scoring (0-100) | Factor | Weight | Score Range | |--------|--------|------------| | Years in business | 15% | <1yr: 20, 1-3yr: 50, 3-5yr: 70, 5-10yr: 85, 10+yr: 95 | | Annual revenue | 15% | <$500K: 30, $500K-$2M: 55, $2M-$10M: 75, $10M+: 90 | | Credit reference score | 20% | Direct mapping from agency (Dun & Bradstreet, Experian Business) | | Payment history (trade refs) | 20% | Always late: 15, Sometimes late: 45, Usually on time: 75, Always on time: 95 | | Financial statement health | 15% | Negative equity: 10, Weak: 35, Adequate: 65, Strong: 90 | | Industry risk | 15% | High risk (construction, hospitality): 30, Medium: 60, Low (govt, utilities): 85 | ### Credit Limit Formula ``` Base Limit = (Customer Annual Revenue × 0.02) × (Credit Score / 100) Adjusted Limit = Base Limit × Industry Multiplier × Payment Terms Factor ``` **Industry Multipliers:** - Government/Utilities: 1.5x - Professional Services: 1.2x - Manufacturing: 1.0x - Retail: 0.9x - Construction: 0.7x - Hospitality/Restaurants: 0.6x **Payment Terms Factor:** - Net 15: 1.2x - Net 30: 1.0x - Net 45: 0.85x - Net 60: 0.7x - Net 90: 0.5x ### Credit Tiers | Tier | Score | Terms | Limit | Review Cycle | |------|-------|-------|-------|-------------| | Platinum | 85-100 | Net 60, 2% early pay discount | Up to formula max | Annual | | Gold | 70-84 | Net 30, 1% early pay discount | 80% of formula | Semi-annual | | Silver | 50-69 | Net 30, no discount | 50% of formula | Quarterly | | Bronze | 30-49 | Net 15 or COD | 25% of formula | Monthly | | Declined | 0-29 | Prepayment only | $0 credit | Re-apply in 6 months | ## Collections Escalation Sequence ### Day-by-Day Protocol | Day | Action | Channel | Template | |-----|--------|---------|----------| | Day -7 | Payment reminder (pre-due) | Email | "Friendly reminder — Invoice #[X] for $[amount] is due [date]" | | Day +1 | First overdue notice | Email | "Invoice #[X] is now past due. Please arrange payment." | | Day +7 | Second notice + phone call | Email + Phone | "This is our second notice. Please contact us to discuss." | | Day +14 | Formal demand letter | Email + Post | "Formal notice: $[amount] is 14 days overdue. Credit terms may be affected." | | Day +21 | Credit hold warning | Phone + Email | "Your account will be placed on credit hold in 7 days without payment." | | Day +30 | Credit hold activated | Email + System | Account frozen. No new orders shipped. Senior contact notified. | | Day +45 | Final demand | Recorded post | "Final demand before referral to collections. 14 days to respond." | | Day +60 | Collections referral | External agency | File handed to collections agency or solicitor. | | Day +90 | Bad debt provision | Internal | Book 50% provision. Review for write-off at 120 days. | | Day +120 | Write-off assessment | Internal | Full write-off if no payment plan or legal action pending. | ### Call Script — Overdue Invoice 1. "Hi [Name], this is [Your Name] from [Company]. I'm calling about invoice [#] for [$amount] dated [date]." 2. "Our records show this is [X] days past the agreed [Net 30] terms. Can you confirm you've received the invoice?" 3. Listen. Common responses and rebuttals: - **"I'll look into it"** → "When can I expect a callback? I'll note [date] and follow up then." - **"We're having cash flow issues"** → "I understand. Can we set up a payment plan? We could split into [2-3] installments." - **"There's a dispute"** → "Let's resolve that now. What specifically is the issue? I'll get our [team] involved today." - **"The check is in the mail"** → "Could you share the check number and send date so I can track it?" 4. Confirm next action and date. Send email summary within 1 hour. ## Key Metrics Dashboard ### Accounts Receivable KPIs | Metric | Formula | Target | Red Flag | |--------|---------|--------|----------| | DSO (Days Sales Outstanding) | (AR ÷ Revenue) × Days | Industry avg ± 5 days | >15 days above industry avg | | AR Aging >60 days | AR >60 days ÷ Total AR | <10% | >20% | | Bad Debt Ratio | Write-offs ÷ Revenue | <0.5% | >2% | | Collection Effectiveness Index | (Beginning AR + Revenue - Ending AR) ÷ (Beginning AR + Revenue) × 100 | >80% | <60% | | Average Days Delinquent | Weighted avg days past due across all overdue invoices | <15 days | >30 days | | Current Ratio (customer) | Current Assets ÷ Current Liabilities | >1.5 | <1.0 | ### Monthly AR Aging Report Template | Bucket | Amount | % of Total | Count | Action Required | |--------|--------|-----------|-------|----------------| | Current (not yet due) | $ | % | | Monitor | | 1-30 days overdue | $ | % | | Reminder sequence | | 31-60 days overdue | $ | % | | Escalate to manager | | 61-90 days overdue | $ | % | | Credit hold + formal demand | | 90+ days overdue | $ | % | | Collections referral | | **Total AR** | **$** | **100%** | | | ## Payment Terms Optimization ### Early Payment Discount Math Standard: 2/10 Net 30 (2% discount if paid within 10 days, otherwise full amount due in 30) **Annualized cost of NOT taking the discount:** ``` Cost = (Discount % ÷ (100% - Discount %)) × (365 ÷ (Full Days - Discount Days)) 2/10 Net 30 = (2/98) × (365/20) = 37.2% annualized ``` This means offering 2/10 Net 30 costs you 37.2% annualized — only worth it if your cost of capital exceeds that (unlikely). Better alternatives: - 1/10 Net 30 = 18.4% annualized (more sustainable) - 0.5/10 Net 30 = 9.2% annualized (low-risk incentive) ### Terms by Industry Benchmark | Industry | Standard Terms | DSO Benchmark | |----------|---------------|---------------| | Technology/SaaS | Net 30, annual prepay common | 45-55 days | | Manufacturing | Net 30-45 | 50-65 days | | Construction | Net 60-90 (progress billing) | 70-90 days | | Professional Services | Net 30, retainer common | 35-45 days | | Healthcare | Net 45-60 (insurance cycles) | 55-75 days | | Retail/Wholesale | Net 30, COD for new accounts | 30-45 days | | Government | Net 30-45 (mandated) | 40-60 days | ## Credit Insurance ### When to Consider - Single customer represents >15% of revenue - Entering new market/geography with unknown payment cultures - Extending credit to construction, hospitality, or retail sectors - Customer credit score drops below 50 - AR >90 days exceeds 5% of total AR ### Coverage Types | Type | Coverage | Cost (% of insured sales) | Best For | |------|----------|--------------------------|----------| | Whole turnover | All trade debtors | 0.1-0.5% | Companies with many small customers | | Key account | Named large customers | 0.3-1.0% | Concentrated customer base | | Single buyer | One specific customer | 0.5-2.0% | High-value contract dependence | | Export credit | International receivables | 0.3-1.5% | Cross-border trade | ## Quarterly Credit Review Checklist - [ ] Pull updated credit scores for all Gold/Silver/Bronze accounts - [ ] Review any customers whose payment patterns changed (>10 day DSO increase) - [ ] Check industry news for bankruptcy, restructuring, or M&A affecting customers - [ ] Recalculate credit limits based on updated revenue data - [ ] Review and update credit insurance coverage - [ ] Audit collections escalation — are timelines being followed? - [ ] Calculate bad debt provision and compare to actual write-offs - [ ] Benchmark DSO against industry and previous quarter - [ ] Present AR aging summary to finance leadership --- ## About This Framework Built by AfrexAI — operational frameworks for businesses running AI agents. **Get the full context pack for your industry:** - 🏪 [Browse all 10 packs — $47 each](https://afrexai-cto.github.io/context-packs/) - 🧮 [AI Revenue Leak Calculator — find where you're losing money](https://afrexai-cto.github.io/ai-revenue-calculator/) - 🤖 [Agent Setup Wizard — configure your AI agent in 5 minutes](https://afrexai-cto.github.io/agent-setup/) **Bundle deals:** - Pick 3 packs — $97 - All 10 packs — $197 - Everything bundle — $247

path: README.md
content: # Credit Control & Collections Framework

Complete B2B credit management system — from customer credit scoring to collections escalation to bad debt prevention.

## What's Inside

- **Credit Assessment Matrix** — 6-factor scoring model (0-100) with weighted criteria
- **Credit Limit Formula** — Revenue-based calculation with industry multipliers and terms factors
- **4-Tier Credit System** — Platinum/Gold/Silver/Bronze with automatic terms, limits, and review cycles
- **Collections Escalation Sequence** — Day-by-day protocol from pre-due reminder to 120-day write-off
- **Call Scripts** — Overdue invoice conversations with rebuttals for every common excuse
- **AR KPIs Dashboard** — DSO, aging ratios, bad debt ratio, Collection Effectiveness Index
- **Payment Terms Optimization** — Early payment discount math (annualized cost analysis), industry benchmarks
- **Credit Insurance Guide** — When to buy, coverage types, cost benchmarks
- **Quarterly Review Checklist** — 9-point credit health audit

## Who This Is For

- Finance teams managing trade credit
- AR/Collections managers reducing DSO
- CFOs benchmarking payment performance
- Business owners extending credit to customers for the first time

## Industry DSO Benchmarks Included

Technology, Manufacturing, Construction, Professional Services, Healthcare, Retail, Government — with standard payment terms and target DSO for each.

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