2016-12-08 00:00:00Finance and AccountingEnglishBad debt expenses are expenses that resulted from uncollectible debts. Find out what they are and their potential impact on your small...https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/10/Female-business-owner-views-bad-debt-expenses-on-mobile-device.jpghttps://quickbooks.intuit.com/ca/resources/finance-accounting/what-are-bad-debt-expenses/What Are Bad Debt Expenses?

What Are Bad Debt Expenses?

0 min read

Bad debt expenses are debts that are uncollectible. This typically occurs if your business delivers products or services to customers before receiving payment, and you later find out that these customers cannot pay for the goods or services delivered due to financial problems.

Don’t automatically write off these uncollectible debts as bad debt expenses. In the event of a bankruptcy, you have the right to collect the money owed after the court liquidates the assets of the bankrupted customer. However, if there is no chance that your business can get its money back, write off these uncollectible debts as expenses. A high bad debt expense indicates that your business may have an inefficient credit and collection process.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

How Increased Disposable Debt Ratios Affect Your Clients and You

The International Monetary Fund issued a warning in 2017 that Canada’s high…

Read more

Use the Snowball Method to Reduce Debt

Small business debt eats away at your profits, so it makes sense…

Read more

Understanding Debt Covenants in Business Loans

If you’re like most business owners, when you take out a loan…

Read more