In the case something goes bad with your receivable balances, some or just one balance, they\u2019re to be written down at least. I say \u201cat least\u201d because one of the options is to also write them off, meaning taking them off the balance sheet entirely. This can be done after they\u2019re written down just as well, but let it be said that writing something down means you consider there\u2019s still some hope whilst writing the balances off means you don\u2019t see any collection there to be made.\u00a0<\/p>\n
Something I struggle to understand is people\u2019s unwillingness to write balances down if they\u2019ve gone \u201cbad\u201d, i.e. if we doubt we\u2019d be able to collect them. It\u2019s merely an accounting entry, an estimate or judgment we\u2019re making and no real effect comes from it to our balance as it\u2019s still collectable and the client is still obliged to pay it. Yes, since the entry is on one hand adding a negative balance on the balance sheet accounts and on the income statement creating an expense entry, some may see it as a loss in profits. I say that I\u2019d rather see the loss as soon as possible rather than keeping something that\u2019s going to create loss at some point on the balance sheet.<\/p>\n
Writing down receivables that are doubtful should be a routine process in ones business. In case of slightest doubt just review the balance and whatever information you can find on the client, it\u2019s payment discipline and so on and make your assessment. Note here that if the client ends up paying, this is a reversal of expense on your income statement so it\u2019s all good from your profit perspective once again.<\/p>\n","protected":false},"excerpt":{"rendered":"
In the case something goes bad with your receivable balances, some or just one balance, they\u2019re to be written down at least. I say \u201cat least\u201d because one of the options is to also write them off, meaning taking them off the balance sheet entirely. This can be done after they\u2019re written down just as […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26,78],"tags":[],"class_list":["post-3895","post","type-post","status-publish","format-standard","hentry","category-2-processes","category-2-8-revenue-and-receivables"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3895","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=3895"}],"version-history":[{"count":1,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3895\/revisions"}],"predecessor-version":[{"id":3896,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3895\/revisions\/3896"}],"wp:attachment":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=3895"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=3895"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=3895"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}