http://creditmanagementassociation.org/forums/topic/48 Sponsored by Credit Management Association en-US Tue, 07 Feb 2012 11:10:29 +0000 http://bbpress.org/?v=1.0.2 q http://creditmanagementassociation.org/forums/search.php http://creditmanagementassociation.org/forums/topic/48#post-401 Wed, 10 Feb 2010 17:50:46 +0000 F Scott Wilson 401@http://creditmanagementassociation.org/forums/ <p>The usual benchmarks I've seen have been between 0.5-1.0% of total sales for the year. The primary factor for the range being so wide is usually the industry. In forest products, a historically very conservative industry, the target for bad debt was usually 0.1-0.2% of sales, far less than I've seen in other industries, and this target was usually met or beaten by the members of my industry group.</p> <p>The biggest factor right now is the economy, which means that currently there is really no prediction on bad debt percentages. Long-time stable companies are vanishing in very short order, as I'm sure we've all seen, so setting a target based on historical norms and data is fine, but it's not (necessarily) going to be a predictor of how much success you'll have reducing bad debt. </p> http://creditmanagementassociation.org/forums/topic/48#post-385 Thu, 04 Feb 2010 16:04:41 +0000 Michael Dennis 385@http://creditmanagementassociation.org/forums/ <p>There must be but I am not familiar with them. </p> <p>In the past, I have used the bad debt write off percentages for publicly traded competitors to establbish this type of benchmark.</p> <p>Michael Dennis </p> http://creditmanagementassociation.org/forums/topic/48#post-384 Wed, 03 Feb 2010 22:38:21 +0000 Michael Kenning 384@http://creditmanagementassociation.org/forums/ <p>Are there any benchmarks available for AR Bad Debt write-offs per year as a % of Sales/Revenue </p> http://creditmanagementassociation.org/forums/topic/48#post-349 Fri, 29 Jan 2010 21:15:35 +0000 Michael Dennis 349@http://creditmanagementassociation.org/forums/ <p>I use a three part process. I create a general reserve that takes into consideration historical bad debt write offs. The second part of the process involves creating a reserve for active accounts considered high risk. The third reserve is for accounts that have been placed for collection, or are in bankruptcy, receivership, have signed an assignment for the benefit of creditors, or are on an extended payout plan.</p> <p>I have never had a serious challenge from an outside auditor using this methodology.</p> <p>Hope this helps.</p> <p>Michael Dennis </p> http://creditmanagementassociation.org/forums/topic/48#post-207 Thu, 03 Sep 2009 00:33:31 +0000 MICHELLE ALJILANI 207@http://creditmanagementassociation.org/forums/ <p>Our approach is a combination of historical and specific account reserve. We identify specific customers we have determined are at risk and will reserve at 50% or 100% of their total due. The percentage depends on several factors including deposits, ongoing open account and personal guarantees among others. Excluding the specific reserve, we use historical 2 year data of "general" write-offs and take that percentage against our total AR balance. Reserving for specific customers eliminates looking at aging buckets since these customers tend to be across the board and the general reserve has proved more than sufficient for the unexpected. </p> <p>We also modified our agings and statements to show aging buckets for 1-15 and 16-30 days past due. That has really helped to improve our collections. The smaller aging bucket has eliminated customers ignoring 1-30 as believing they are only a few days late. </p> http://creditmanagementassociation.org/forums/topic/48#post-197 Tue, 01 Sep 2009 16:17:12 +0000 F Scott Wilson 197@http://creditmanagementassociation.org/forums/ <p>Our approach to reserves for bad debt is to go over all accounts over ninety days out, and assign a collectibility percentage based on historical data. We're still fine tuning this, but each department gathers on a quarterly basis, and each manager goes over the 90+ accounts, reviewing each and giving a reason for our decision.</p> <p>Currently, we have seven benchmarks, based upon size of debt, whether secured, disputed items, legal status and so forth. Incidentally, we assign accounts we are referring to legal a straight 50%, regardless of amount or other considerations, and that is the largest reserve for an item we use. Bankruptcies are considered legal issues, so are assigned the flat 50%, regardless of the defensibility of purported preferences. </p> http://creditmanagementassociation.org/forums/topic/48#post-193 Mon, 31 Aug 2009 23:10:59 +0000 DMarc CBA 193@http://creditmanagementassociation.org/forums/ <p>Another option is a combination of historical and specific accounts. Start with a review of your historical losses as a % of sales and add any accounts that are probable bad debts now. You may also want to set aside some $$ for potential preferences on any pending bankruptcy. </p> http://creditmanagementassociation.org/forums/topic/48#post-190 Mon, 31 Aug 2009 18:19:40 +0000 Fay D'Amico 190@http://creditmanagementassociation.org/forums/ <p>What I usually do is take 50% of over 90 days and 100% of over 180 days. Although everyone buckets are different the premiss is still the same. </p> http://creditmanagementassociation.org/forums/topic/48#post-189 Mon, 31 Aug 2009 15:42:38 +0000 Mark Wittmann 189@http://creditmanagementassociation.org/forums/ <p>What method is used to evaluate the adequacy of the bad debt reserve? ie. specific account review or a formula based on aging buckets? If formula what % is applied to the various aging buckets? </p>