I think you wrote about this. How do you recommend we develop our bad debt reserve?

Answer: I use this approach and perhaps it can work for you…

I create a general reserve based on a percent of prior year sales such as one tenth of one percent of prior year sales. Next, I calculate a specific reserve for accounts already identified as problematic - including accounts in bankruptcy

Insolvency Under the Balance Sheet definition of insolvent in the U.S. Bankruptcy Code, a debtor is insolvent when the value of a debtor's assets is exceeded by the debtor's liabilities.

Insolvency Under the Balance Sheet A financial statement listing the assets, liabilities and owner’s equity of a business entity as of a specific date. definition of insolvent in the U.S. Bankruptcy Code, a debtor is insolvent when the value of a debtor's assets is exceeded by the debtor's liabilities. y.) or placed for collection. Third, I determine a high-risk reserve for customers that are slow pay, and/or highly leveraged and/or disputing the outstanding balance. I hope this helps.