Which of your customers is most likely to pay late — or default? Score any B2B customer in 60 seconds using the Expected Loss formula (PD × LGD × EAD) trusted by Euler Hermes and Atradius.
B2B invoices in India will be paid more than 90 days late
Source: SIDBI MSME Pulse Q4 2024
Average Days Sales Outstanding (DSO) for Indian SMBs
Source: Atradius Payment Practices Barometer 2024
of SMB bad debt write-offs come from manufacturing & construction
Source: SIDBI MSME Pulse 2024
reduction in bad debt exposure from advance payment + short terms
Source: Dun & Bradstreet, 2024
The core question every CFO must answer before extending credit: If this customer doesn't pay, how much will we actually lose?
The answer requires three numbers: Probability of Default (PD) — how likely they are to fail; Loss Given Default (LGD) — how much of the debt you'll recover; Exposure at Default (EAD) — the outstanding invoice value.
According to Atradius Payment Practices Barometer 2024, 48% of the total value of B2B invoices in India were paid late, and 8% were written off as uncollectable. For a business with ₹1 crore in outstanding receivables, that's ₹8 lakh in direct losses — before accounting for collection costs.
Euler Hermes Global Insolvency Outlook 2024 forecasts global business insolvencies to rise 9% in 2024 and a further 6% in 2025, with India's construction and real estate sectors showing the highest stress indicators.
Dun & Bradstreet's 2024 Global Business Optimism Insights confirms that customer payment risk is the #1 concern for credit managers globally — ahead of currency risk, interest rate risk, and regulatory changes.
The solution is a systematic debtor risk scoring methodology — the same framework used by trade credit insurers — applied to your accounts receivable portfolio.
The Expected Loss Formula — Basel II / Credit Insurance Standard
Likelihood customer fails to pay. Ranges from 2% (low risk, long tenure) to 30%+ (critical risk, new customer, construction sector).
Percentage of debt lost after collection efforts. Industry average in India: 55–70%. Reduces with advance payment or trade credit insurance.
Total outstanding invoice value at risk. Equals your current receivable balance plus any work-in-progress not yet invoiced.
A CFO is deciding whether to fulfil a ₹25,00,000 order for a construction company that has paid 61 days late on average across 7 prior invoices.
Inputs
Calculation
Anonymized profiles from invoicefollowups.com dataset, 2024. Load any profile into the scorer below.
TechServe Solutions, Bengaluru
IT / Software · 4 years tenure · ₹2.4 Cr / year
BuildCon Infrastructure, Mumbai
Construction · 8 months tenure · ₹8.2 Cr / year
MedTech Pharma, Hyderabad
Pharma / Health · 2 years tenure · ₹5.1 Cr / year
Sources: invoicefollowups.com anonymized SMB dataset 2024 · Atradius Payment Practices Barometer 2024 · SIDBI MSME Pulse Q4 2024
Enter your customer's payment data. Get their risk score, probability of default, expected loss, and exact recommended actions.
Customer Details
Customer's est. annual turnover
EAD — outstanding invoice value
Days past due on prior invoices
Total number of late payments
CIBIL / D&B score (300–900)
Years as your customer
Base PD for selected industry: 0%
Formula: Risk Score (0–100) → PD → EL = PD × LGD × EAD
Enter your customer's details to see their debtor risk score, expected loss, and recommended actions.
Source: Atradius Payment Practices Barometer 2024 · Euler Hermes Global Insolvency Outlook 2024 · SIDBI MSME Pulse Q4 2024
| Industry | Avg DSO | P75 DSO | Default Rate | Risk Level |
|---|---|---|---|---|
| IT / Software | 42 days | 65 days | 4% | Low |
| Manufacturing | 55 days | 82 days | 7% | Medium |
| Construction | 67 days | 95 days | 11% | Critical |
| Retail / FMCG | 30 days | 52 days | 6% | Medium |
| Wholesale / Trade | 45 days | 70 days | 8% | Medium |
| Real Estate | 72 days | 105 days | 12% | Critical |
| Pharma / Health | 52 days | 75 days | 4% | Low |
P75 DSO = 75th percentile — 25% of companies in this sector have longer collections. Default rate = % of B2B receivables written off as uncollectable.
Approve full credit
Standard terms. Quarterly DSO review.
Approve with conditions
Shorten to net-30. Structured follow-ups.
Require 30% advance
Reduce limit 50%. Buy credit insurance.
Stop shipments now
100% advance or escalate to legal.
Step 2: Collect faster. Businesses using systematic invoice follow-ups cut their average collection period from 54 days to 28 days within 90 days — without hiring a collections team.
Methodology & Data Attribution
Five-factor weighted model: Payment behaviour (35%), Invoice concentration (20%), Industry default rate (20%), Customer tenure (15%), Credit score risk (10%). Country risk applied as a multiplier (0.70×–1.45×) to raw score. Mirrors Basel II retail credit scoring framework and Atradius underwriting criteria.
Base PD from industry sector (Atradius 2024 default rate data). Adjusted for country risk multiplier and score-based multiplier (1× to 3.5× base PD). Capped at 95% to reflect theoretical maximum.
Industry-specific Loss Given Default rates sourced from Euler Hermes Global Claims data 2024. Ranges: IT/Pharma 52–55%, Manufacturing/Wholesale 60–62%, Construction/Real Estate 68–70%.
This tool provides estimates for credit decision support. It does not replace a full credit assessment or legal due diligence. LGD and PD figures represent sector averages; individual outcomes will vary. Scores above 55 warrant additional qualitative review.
Last Updated: April 2025
Researched and compiled by: invoicefollowups.com Research Team