A type of bad debt provision method:

Delinquency Flow Models use the basic method of probability theory to determine the provision rate for credit card overdrafts through the following five steps :

In the first step, those that are not overdue (including overdrafts that have repaid the minimum repayment amount) are defined as cycle 0, those that are overdue for 0-29 days are defined as cycle 1, and those that are overdue for 30-59 days are defined as cycle 1. It is cycle 2, overdue for 60-89 days is defined as cycle 3, overdue for 90-119 days is defined as cycle 4, overdue for 120-149 days is defined as cycle 5, overdue for 150-179 days is defined as cycle 6, overdue for 180 days Periods of more than 7 days are defined as period 7;

The second step is to calculate the bad debt installment change rate (Flow rate) of each period based on the amount of arrears in the previous period that enters the next period, that is Bad debt installment change rate = Accounts receivable balance for the current month/Accounts receivable balance for the previous month;

The third step is to smooth the bad debt installment change rate in the last 6 months and calculate Calculate the 6-month average bad debt installment change rate and bad debt recovery rate (Bad Recovery Rate), that is, the 6-month average bad debt installment change rate = ∑ 6-month bad debt installment change rate / 6, and the bad debt recovery rate = ∑ 6 months Bad debt recovery amount/∑6-month write-off principal amount;

The fourth step, calculate the net bad debt loss rate (Net Contractual Loss Rate),

The fifth step, calculate the bad debt provision Reserve amount.