In relation to accounts receivable (A/Rs) financing, it is a method to identify delinquent business accounts. This rule entails that once a specific percentage of receivables (invoices) for an account becomes past due/  overdue, then whole account is treated as overdue. This method conducts a comparison between the dollar amount of past due invoices to the total amount of invoices due. When more than a a specific percentage of an account balance is past due, the entire account is classified as tainted (also, cross-aged). For example, if an account has $15,000 in total receivables and $7,000 is past due, the percentage of overdue part is 7000/ 15000 (≈ 46.6%). If a firm defined its threshold for past-due receivables as 30%, this account will be considered tainted.

This threshold, and the age of overdues vary from a sector to another, and even across industries, line of business, and the management’s objective. Normally, the threshold ranges between 25 and 33 percent for overdue ages exceeding 90 days.

The taint rule affects many aspects in a firm including its credit policies, and creditworthiness, valuation, etc.

This rule is also known as a cross-age rule.