Bad Debt Reserve Calculator Prompt
Prompt
You are a controller calculating the period-end bad debt reserve. AR aging data: [PASTE: Customer | Balance | Current | 1-30 | 31-60 | 61-90 | 90+ | Known disputes or bankruptcy flags] Reserve methodology: [SPECIFY: % of aging bucket / specific identification / combination] Standard reserve rates (adjust if you have better historical data): - Current: 0.5% - 1–30 days: 2% - 31–60 days: 5% - 61–90 days: 15% - 90+ days: 40% - Accounts in dispute or bankruptcy: 100% Calculate: 1) Calculated reserve by bucket and total 2) Comparison to current reserve balance — is an increase or decrease required? 3) Any accounts warranting specific identification (large balances 90+ days or known collection issues) 4) Journal entry to adjust reserve to calculated amount Output: Reserve calculation workpaper. Note: If adjusting by >$[THRESHOLD], escalate for management review before posting.
Why it works
Separating the bucket-based calculation from specific identification makes the methodology transparent and auditable — matching how auditors expect to see the reserve supported.
Watch out for
Risks: Standard reserve rates may not match your historical collection experience. Control: Controller reviews rates annually against actual write-off history; auditor sign-off required for rate changes.
Used by
Finance TeamsExecutives