Bad Debt to Sales Ratio
Percentage
This metric gives the percentage of sales that have been written off as uncollectible. It provides insights into the effectiveness of credit policies and collection efforts. A higher ratio could indicate lenient credit policies or an ineffective collections department.
Formula
(Bad Debts / Total Sales) x 100
Example
If bad debts are $1,000 and total sales are $100,000, then Bad Debt to Sales Ratio = (1,000 / 100,000) x 100 = 1%.