Bad Debt Expense

Bad debt expense is the cost recognized when an account receivable is deemed uncollectible. It affects a business’s profitability and is recorded on the income statement. By estimating bad debt, businesses can account for potential losses and avoid overstating income. Automating the tracking of bad debt using AI tools helps businesses proactively identify at-risk accounts and minimize losses.

Regularly adjusting bad debt expense ensures that businesses have a realistic view of their financial health. AI-driven systems can predict potential bad debt based on customer payment history, helping businesses adjust their forecasts. Managing bad debt efficiently improves overall financial accuracy and reduces the impact of uncollectible accounts.