What Are Bad Debt Expenses?

By QuickBooks Canada Team

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 to Address a Bad Review

Bad reviews can harm any business, but they can be especially detrimental…

Read more

Expanding and Financing Your Accounting Business

Deciding to expand your accounting firm is an exciting step, and one…

Read more

Guidelines for Claiming Advertising Expenses on a Canadian Business Tax Return

Advertising is an essential part of starting and maintaining a profitable small…

Read more