Bad Debt Policy

This tool contains two sample policies that establish procedures for determining the bad debt reserve when finalizing accounts receivable on the financial statements.

In these samples, the company maintains a bad debt reserve via a general reserve and a specific reserve. The general reserve is calculated by applying a percentage to each accounts receivable bucket. The percentage methodology is reviewed at least annually to ensure that it is appropriate and consistent with the current business environment the company is operating in. The general reserve methodology is applied net of any specific reserves from each bucket. A specific reserve is also calculated at least quarterly.