Accounts Receivable (AR) can be a source of financial difficulty for firms when they are not efficiently managed. Research shows that effective management of AR and the overall financial performance of firms are positively correlated. As such, the problem of reducing outstanding receivables through improvements in the collections strategy has drawn the attention of scholars as well as practitioners in the accounting field.

Your task is to develop a Decision Tree model that can predict with high accuracy if an invoice will be paid on time or not and provide estimates of the magnitude of the delay. For a better assessment of your model, use Cross-Validation in your model. Include all variables in the model.

  

Use the Optimize Parameters operator and/or the MetaCost operator to reach the best results

By using these operators, I reach to overall 89.10% accuracy (Recall: 82.33% for on time, 96% for 1-30 days late, 100% for 31-60 days late, 99.25% for 61-90 days late, and 100% for 90+ days late)

Variables in the dataset:

- Pay class (Label): five categories (on time, 1-30 days, 31-60 days, 61-90 days, 90+ days) - Polynomial

- customer: customer ID - Polynomial

- month: month in which an invoice was issued - Integer

- base amount: the amount of invoice in dollars - Integer

- dispute: Whether or not an invoice was disputed (Yes or no) - Polynomial

Question

Part 1: Business Understanding (Problem):
In a few sentences, briefly describe what you aim to predict and how this model helps management.

Part 2: Data Understanding
Describe the sample, including the sample size and variables in the dataset, and attach the appropriate tables for both scale and nominal variables (similar to what you did for the previous assignments).

-O ontime base amount >11250 ontime. month > 6.500 $11250 $6.500 1-30 days ontime dispute base amoun >6130 1-30 days dispute you ontime 31-40 days 16130 ontime customer 50+ days base amoun > 44000 >16650 base amount $44000 month >9.500 $9.500 31-60 days 16650 61-90 day! month ontime >6 56 dispute 61-90 days ontime 90-days