Technically, if a customer doesn’t pay because they are not using the product, the accounts receivable write-off should go against revenue, not bad debt expense. If they don’t pay because of financial difficulties (i.e. bankruptcy) then it could be booked to bad dept expense.
I don’t think using the product matters does it? A lot of SaaS companies would be reversing revenue if it did…you should stop revenue tho if it becomes likely they won’t pay and maybe usage is an indicator. But lots pay and never use the product
I’m really glad you definitely didn’t give all of our secrets away…
Ps - you look even more resplendent on here than twitter
Haha! Welcome to Substack!
look forward to the cfo stuff that will get discussed here
Technically, if a customer doesn’t pay because they are not using the product, the accounts receivable write-off should go against revenue, not bad debt expense. If they don’t pay because of financial difficulties (i.e. bankruptcy) then it could be booked to bad dept expense.
I don’t think using the product matters does it? A lot of SaaS companies would be reversing revenue if it did…you should stop revenue tho if it becomes likely they won’t pay and maybe usage is an indicator. But lots pay and never use the product
Agree...was just keeping the scenario the same. Also agree that if you know they are not going to pay you shouldn't take revenue. Love your stuff BTW!
Thanks!
This’ll help. https://johnmartinwords.substack.com/p/gross-margin