Our Allowance for Doubtful Accounts Policy is designed to assist organizations in effectively managing allowances for doubtful accounts. It provides clear policies and procedures that promote consistent accounting practices and safeguard company assets. By utilizing this tool, businesses can enhance their operational efficiency and strengthen internal controls while ensuring compliance with relevant regulations. It supports ongoing improvements in financial management and helps organizations respond confidently to evolving business needs.

This audit tool includes three samples, each addressing different aspects of managing allowances for doubtful accounts. Sample 1 focuses on establishing guidelines for uniform accounting practices while defining key terms related to accounts receivable management. Sample 2 emphasizes the procedures for monitoring delinquent accounts and setting reserves for uncollectible debts, highlighting the importance of regular reviews and effective communication with customers. Sample 3 outlines the appropriate accounting policies necessary to maintain adequate reserve levels, detailing the factors that influence the valuation of accounts receivable and the need for adjustments based on changing business conditions. Together, these samples provide a framework for organizations to refine their approach to managing doubtful accounts effectively.

Sample procedures include:

• The allowance for doubtful accounts must be adjusted to the base allowance using the allowance for doubtful accounts computation worksheet.
• If an acquisition indicates that a larger allowance is needed, an upward adjustment will be made immediately.
• When collection activities are unsuccessful due to bankruptcy or the inability of a customer to pay, customer accounts will be placed for collection with an outside agency with authorization from the company controller and CFO.