I am starting my own business. What is an acceptable percentage to allow for bad debt?
Question by grbrgrl1: I am starting my own business. What is an acceptable percentage to allow for bad debt?
I am starting my own business. What is an acceptable percentage to allow for uncollected customer accounts? In other words, bad debt expense?
Best answer:
Answer by laughter_every_day
There is no general answer. if you are starting a pay-day loan place, it will be a lot. If it is a dry-cleaner, it will be less.
Add your own answer in the comments!
April 15th, 2011 at 4:11 pm
None… when you are just starting a business you need to put up a sign that says “IN GOD WE TRUST… ALL OTHERS PAY CASH”.
And stick to it… no tickey no washie
April 15th, 2011 at 4:54 pm
It always depends of the market you`re in. Some fields of activity will allow 5% an others will allow 10%. You have to decide if you want to calculate your percentage on the total of your receivable or on the total of your sales, both are common practice. At first create an allowance for Doubtful Account in your balance sheet and make an estimate. The year after you will see if you`ve been too far off or if you`ve pretty much estimated it right. If you`ve over estimated it then make your new entry with a smaller amount for the following year.
April 15th, 2011 at 5:12 pm
You don’t have to allow any. If you do have bad debts, you can simply write it off as other losses. Many businesses have no bad debt. Some have a lot.