Scoring forms the foundation of your collections activities. Oracle Advanced Collections uses scoring in two ways:
To determine transaction status: current, delinquent, and pre-delinquent.
When scoring transactions, Advanced Collections looks at transactions from Oracle Receivables, including invoices, debit memos, and chargebacks; lease invoices originating in Oracle Lease and Finance Management; or loans invoices originating in Oracle Loans. In general, if a customer has delinquent transactions, the customer is considered to be delinquent.
To determine the value of each customer.
When scoring to assign customer value, you can use any data point about the customer. Typically you run customer value scoring at an operational data level (customer, account, bill to, or delinquency).
Once you know which transactions are delinquent and you know the relative value of a customer, you can manage delinquencies more effectively with either collections strategies or dunning plans.
Note: The score displayed in the Collections Score field in the Collections header is always the customer-level score.
Let's say you want to evaluate your customers and select the appropriate collections management method for each. In this example, you want to use three factors to select the collections plan for a customer: how much they owe, how many transaction are overdue, and how long they have been a customer. To find out this information, you create a scoring engine with three scoring components to calculate the following information for each customer:
The total overdue amount
The number of delinquencies
The number of years you have had a relationship with this customer
But how do you use the results of these scoring components to rank your customers? For some components, a high number means you are dealing with a good customer, but in other instances, a low number is better.
The total overdue amount - low number is better
The number of delinquencies - low number is better
How long you have been doing business - high number is better
To qualify the numbers returned by the scoring components, break down the possible numerical results into ranges and assign a value, or score, to each range.
The following tables show the ranges and scores for each scoring component.
Amount Overdue Scoring Component
| Amount Overdue | Score |
|---|---|
| $0 - $999 | 100 |
| $1000 - $4999 | 50 |
| $5000 - $9999 | 25 |
| Over $10,000 | 10 |
Number of Delinquencies Scoring Component
| Number of Delinquencies | Score |
|---|---|
| 0 - 9 | 100 |
| 10 - 19 | 50 |
| 20 - 39 | 25 |
| over 40 | 10 |
Customer Since Scoring Component
| Customer Since | Score |
|---|---|
| Less than 1 year | 10 |
| 1 - 2 years | 50 |
| 3 - 5 years | 75 |
| over 5 years | 100 |
However, one type of information about a customer may be more important than another when evaluating which collections activities to use. Let's say that the amount a customer owes is a more important factor than how long they have been your customer or the number of delinquencies they have. You need a way to compare the disparate numbers derived by the scoring components. To do this, assign a weight to each component to indicate its relative importance to the total score. The total weight of all components must add up to 1.0.
The following table shows the weights for the scoring components.
| Scoring Component | Weight |
|---|---|
| Amount overdue | .5 |
| Number of delinquencies | .3 |
| Customer since | .2 |
Based on this setup, Advanced Collections calculates the score for a customer who owes $18,425 on 9 delinquencies, and has been a customer for 2 years as follows:
(10 x .5) + (100 x .3) + (50 x .2) = 5 + 30 + 25 = 60
You can create new scoring engines or use the preconfigured scoring engines provided by Advanced Collections. In either case, you must test your assumptions by running scoring in a test environment with a small segment of your actual data.
Scoring transactions to determine whether they're current, delinquent or pre-delinquent works the same as scoring for customer value, but with one additional step. A transaction scoring engine with one or more scoring components obtains scores for all transactions. Once the transactions have been scored, you need to set score ranges for the status of either current, delinquent or (if your business rules require) pre-delinquent.
For example, your Transaction scoring engine uses a component that looks at the due date of a transaction and then assigns a status based on the score and the defined score ranges. If the due date for a transaction is greater than today's date, it assigns a score of 1 and the transaction is current. If the due date is less than today's date, score is 100 and the transaction is delinquent. Using the preconfigured Delinquency Status Determination scoring engine, the score ranges are shown in the following table:
| Score Range Low | Score Range High | Status |
|---|---|---|
| 1.00 | 10.99 | Current |
| 11.00 | 100.00 | Delinquent |