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Startup Accounting

Bad Debt and the Allowance for Doubtful Accounts

Written by Harry Prabandham

Curated by Rubric Financial

Last updated

1 / 5

Why Bad Debt Exists

  • Some customers who owe you money will never pay, whether from churn, disputes, or insolvency.
  • Recognizing revenue on an invoice does not guarantee the cash will ever arrive.
  • Bad debt is the portion of your receivables you realistically expect to lose.
  • Ignoring it overstates both your assets and your reported financial health.

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About the author

Harry Prabandham

Founder & CEO

Founder and CEO of StartupCFO. MBA from Wharton, MS in Computer Science, and decades of experience building and advising venture-backed startups.

More articles by Harry →

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