How to Use the Percentage of Sales Method
The primary objective of GAAP is to provide reliable financial information that can be used by investors, creditors, and other stakeholders to make informed decisions. You can use any method to record bad debt, as long as you remain consistent from year to year (and disclose that you’ve changed methods if that’s the case). Customers’ likelihood to short pay or skip paying altogether is deeply related to how you communicate with them throughout the billing and payment cycle. As...