COD receivables and driver float expected credit losses

Cash collected by drivers/couriers on behalf of the company and outstanding driver floats are financial assets exposed to loss from theft, fraud, or driver default, requiring an expected credit loss allowance from initial recognition rather than recognition only when a specific loss is identified. This matters for last-mile and e-commerce delivery models where COD balances can be large and operationally distinct from typical trade receivables, making unrecognized shortfalls a real earnings and cash risk.

How significant are cash-on-delivery balances and driver/courier cash floats relative to total receivables at any point in time, and are they in the scope of IFRS 9 as financial assets requiring an ECL allowance? Is there a documented history of shortfalls, unreconciled cash, or losses linked to driver turnover that should inform the loss-rate model? Are floats segmented by driver tenure or route risk and reconciled/aged on a regular basis to support the estimate?

1) Identify all COD cash balances and driver/courier floats outstanding at any point in time as financial assets within IFRS 9's scope. 2) Segment these balances by driver tenure, route risk, and reconciliation/write-off history. 3) Build a loss-rate model (an ECL provision matrix analogous to trade receivables) reflecting historical shortfall rates for each segment. 4) Incorporate forward-looking adjustments such as driver attrition trends, onboarding/vetting changes, or known operational control weaknesses. 5) Recognize an ECL allowance against the gross COD/float balance at each reporting date, updating it as facts and circumstances change rather than waiting for a confirmed loss event. 6) Write off amounts only when recovery is deemed remote (e.g. driver has absconded and is unreachable), reducing both the gross asset and the allowance.

Measure the ECL allowance using a provision matrix or roll-rate approach segmented by driver risk category (tenure, route, reconciliation frequency), applying historical loss rates adjusted for current and forward-looking conditions (e.g. rising driver turnover, new hiring channels). Since these balances typically have short expected lives (cash is usually reconciled within days), the ECL is generally a 12-month or even shorter-horizon expected loss, but should still reflect realistic loss-given-default assumptions (e.g. partial recovery through payroll deduction or legal action).

Disclose: (1) the nature of driver float and COD exposures and why they are treated as a distinct risk category from trade receivables; (2) the basis for the ECL allowance (provision matrix, segmentation, key assumptions); (3) a reconciliation of the loss allowance during the period; (4) significant write-offs and recoveries; (5) internal controls or operational mitigations (e.g. daily reconciliation, bonding/insurance over driver floats) if relevant to understanding the risk.

• Treating driver floats as prepaid expenses or advances with no credit loss allowance at all
• only writing off COD shortfalls when discovered rather than provisioning proactively based on historical loss rates
• applying the same loss rate to all drivers regardless of tenure or route risk
• failing to distinguish timing differences (cash in transit awaiting reconciliation, which is normal) from genuine expected credit losses (cash unlikely to ever be recovered).