Bad Debt as % of Revenue
Value of receivables written off as irrecoverable as a percentage of total revenue
What is Bad Debt as % of Revenue?
Bad debt as a percentage of revenue is the share of revenue written off because customers never pay. It shows how much of sales turns into losses.
It reflects the quality of credit decisions and collections, and directly reduces profit.
How this KPI is measured
- Function
- Finance
- Sub-function
- Accounts Receivable
- Industry
- All Industries
- Type
- Lagging
- Impact
- Risk
- Unit
- %
- Measurement frequency
- Monthly / Quarterly
- Formula
- (Bad debt written off / Total revenue) × 100
How to calculate it
Divide bad debt written off by total revenue, and multiply by 100.
For example, if 150,000 was written off on revenue of 20,000,000, bad debt is 0.75%.
Measure over a full period, and read alongside ageing of receivables, since rising overdue balances often precede write-offs.
Where it is used
Judging credit control
See the cost of unpaid invoices.
Setting credit policy
Balance sales and risk.
Provisioning
Plan for likely losses.
How to improve it
Tips and common mistakes
- A very low figure can mean credit policy is too tight and sales are being lost.
- Watch ageing as an early warning.
- Follow accounting rules on provisions.
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