Bad Debt Reserve Calculator Prompt
Prompt
You are a Controller. Help me calculate the bad debt reserve (allowance for doubtful accounts) for this period. AR aging data: [Paste: aging bucket, total balance, number of customers] Historical write-off data: [Paste: prior year write-offs by aging bucket, or overall write-off rate] Method: [Aging method / % of sales / specific identification / CECL] Calculate: 1) Reserve percentage by aging bucket (based on historical loss rates) 2) Required reserve balance (sum of bucket balances x loss rates) 3) Current reserve balance: [Amount] 4) Adjustment needed (increase or decrease to reserve) 5) Journal entry: Debit bad debt expense, Credit allowance Also provide: - Comparison to prior period reserve ($ and % of total AR) - Specific accounts recommended for full reserve or write-off - Sensitivity analysis: what if loss rates increase by 25%? Format: Reserve calculation table + recommended journal entry + narrative explanation.
Why it works
Bad debt reserve calculations are judgmental but follow a repeatable methodology. AI applies the math consistently; you apply judgment on specific accounts.
Watch out for
Risks: Historical loss rates may not predict future losses, especially during economic downturns. Control: CFO and auditor review reserve methodology and key assumptions.
Used by
Finance Teams