Allowance for doubtful debts
The bad debt allowance is the value adjustment on the stock of customer receivables for the risk that part of it will not be paid; it reduces the balance sheet value of receivables without writing off any individual claim.
Definition
Two routes are customary. The flat allowance applies a percentage to the whole receivables balance — for tax purposes a single-digit rate is often accepted, with cantonal differences. Individual valuation assesses each doubtful claim on its own and is the more accurate but more laborious method.
The distinction from a bad debt loss matters: the allowance is an expectation, the loss a fact. Whoever mixes the two reports either receivables that are too high or losses that are too high.
What the software must be able to do
Check whether the software can calculate a value adjustment on the receivables balance without altering the individual open items, and whether the ageing structure of receivables is evaluated as the basis for it.
Checked Aug 2026
More terms under Invoicing, payment and banking: Advance payment Bad debt camt.053 Cancellation invoice Cash discount Certificate of shortfall Credit note Creditor Current account Debt enforcement Debtor Default interest Delivery note Dunning eBill Final invoice IBAN Invoice number ISO 20022 / camt Open items pain.001 Part payment Payment term Pro forma invoice QR reference QR-bill QR-IBAN Quotation Receipt Tips TWINT as a payment method Visitor taxes