Bad Debt Provisioning Checklist

Provisioning versus write-off

Provisioning and writing off are related but distinct. A provision is an estimate, set aside in your accounts, of receivables you may not collect — it keeps the balance sheet honest without abandoning the debt. A write-off removes a specific debt you have decided is uncollectable. Provisioning is the earlier, softer step: it acknowledges risk while you keep pursuing. This checklist is general information; confirm the accounting and tax treatment of any provision with your accountant before you rely on it.

The provisioning checklist

• Run the aged report — start from current, 30, 60 and 90+ day buckets.
• Identify doubtful debts — flag overdue accounts where recovery looks uncertain.
• Note the reason — record why each debt is doubtful (age, dispute, distress signals).
• Check distress signals — broken promises, part-payments, or insolvency news raise the risk.
• Estimate recoverability — assess how much of each doubtful debt is likely to be collected.
• Set the provision — provision against the doubtful portion in line with advice.
• Review existing provisions — release or increase prior provisions as accounts move.
• Document — log the basis for each provision for audit and review.

How to use it

Work from the aged report and let the older buckets draw your attention first, since the 60 and 90+ accounts are where doubt usually concentrates. For each doubtful debt, write down why — age alone, an open dispute, broken promises, or news of distress — so the provision rests on a reason rather than a feeling. Keep pursuing while you provision; a provision is an accounting acknowledgement, not a decision to stop collecting, and many provisioned debts are still worth a referral via refer a debt. Use the free calculators to size the doubtful portion, and confirm the treatment with your accountant.

Review every period

Provisions are estimates, so revisit them each period end and adjust as accounts actually move — release the provision when a doubtful debt pays, increase it when the outlook worsens, and convert it to a write-off only when the debt is genuinely exhausted. Tie this review to your debt write-off policy so provisions and write-offs are decided on the same evidence. Over time the pattern of what you provision against points back to where your credit process needs tightening.