To compute bad debt expense, estimate the percentage of credit sales that may become uncollectible. Multiply this percentage by total credit sales for the period to determine the expected bad debt amount. Finally, record this figure as an expense on the income statement to reflect potential losses from uncollectible debts.
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Emagia is a leading provider of AI-powered Order-to-Cash (O2C) automation platform that modernizes finance operations for midsize to large global businesses. Many global businesses and shared service centers use Emagia’s Autonomous O2C to transform to digital world-class operations in credit, invoicing and payments, receivables, collections, deductions, cash application and cash forecasting. Emagia solutions improve their customers DSO, cash flow, credit risk, operational cost, compliance and profitability.
