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How to Calculate the Percentage of Bad Debt

Original post by C. Taylor of Demand Media

Calculating the percentage of bad debt allows a business to track increases or decreases in uncollected bills. Although a certain percentage may be unavoidable, increases in bad debt indicate a higher risk realization of bad debt, which also increases the risks of having to write off deadbeat accounts. Calculating the percentage of a company's bad debt is a fairly straightforward process.

Contents

Step 1

Consult your company's balance sheet to acquire the total sales revenue and the amount of uncollected debt. Alternatively, you may use total accounts receivable and the amount of this total that is eventually written off.

Step 2

Divide the amount of bad debt by the total figure. For example, if you had $250,000 in total sales with $25,000 of uncollectable debt, then the bad debt rate is 0.10.

Step 3

Multiply by 100 to calculate the percentage. In the example, 0.10 times 100 gives you a bad debt percentage of 10 percent.


                   

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About the Author

C. Taylor has been a professional writer since 2009. He has written for online publications and the "Journal of Asian Martial Arts." Taylor specializes in martial arts, traveling, sciences and computer repair. He received a Master of Science in wildlife biology from Clemson University and a Bachelor of Arts in biological sciences from the College of Charleston.


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