Bad Debt Percentage Calculator
Calculate write-offs as a percentage of credit sales or receivables.
How is bad debt percentage calculator worked out?
Bad debt percentage is the value of receivables written off divided by credit sales for the period, multiplied by 100. It measures the share of what you billed that you ultimately never collected.
Bad Debt Percentage Calculator
Bad debt as a share of credit sales
1.33%
- Sales needed to replace the lost profit
- $30,000.00
- At a 40% gross margin.
- As a share of average receivables
- 8.57%
Show the working
| Bad debt written off | $12,000.00 |
| Credit sales in period | $900,000.00 |
| Bad debt as % of credit sales | 1.33% |
| Replacement sales required | $30,000.00 |
Bad debt is the most expensive kind of revenue, because you have already paid the costs of delivering it. This calculator shows the write-off ratio and — usually the more sobering figure — how much additional revenue you would need to generate at your margin simply to get back to where you were.
The formula
Bad debt % of sales = bad debt written off ÷ credit sales × 100
Bad debt % of receivables = bad debt written off ÷ average receivables × 100
Sales needed to replace the loss = bad debt written off ÷ (gross margin % ÷ 100)The last line is the one worth showing anyone who is reluctant to enforce credit terms. At a 25% gross margin, writing off 10,000 requires 40,000 of additional sales just to restore the same profit.
Why the replacement figure matters more than the ratio
A bad debt ratio of 1.3% sounds tolerable. The same loss expressed as the sales required to recover it usually does not: at a 40% gross margin, every pound written off needs two-and-a-half pounds of new revenue to restore the profit, and that revenue costs time and money to win. Framing write-offs this way is generally what makes credit control feel worth resourcing, because it converts an accounting adjustment into a sales target.
Preventing bad debt is mostly done before the sale
By the time an invoice is a candidate for write-off, the options are poor. The decisions that actually determine bad debt happen earlier: checking a new customer's credit before extending terms, setting a credit limit and enforcing it, taking a deposit on large or first-time work, invoicing promptly, and following up the moment an invoice goes past due. Concentration is the other risk worth watching — a single customer who represents a large share of receivables is a single point of failure regardless of how reliable they have been.
Writing off is a decision, not a defeat
Continuing to chase a debt that will not be paid costs time that could be spent collecting debts that will. Where recovery is genuinely unlikely, writing the balance off clears the aging report so it reflects reality, and in many jurisdictions allows relief on tax already accounted for on the sale — the rules and timing for that differ, so confirm the position where you are registered. What matters is that the decision is made deliberately at a defined point, rather than by an invoice quietly sitting in the 90+ bucket for a year.
Frequently asked questions
How do you calculate bad debt percentage?
Divide the value of receivables written off by credit sales for the period and multiply by 100. Writing off 12,000 against 900,000 of credit sales gives a bad debt percentage of about 1.3%.
What is an acceptable level of bad debt?
It varies considerably by industry and by how much credit risk a business deliberately takes on, so the meaningful comparisons are your own trend and your own margin. A ratio that is rising, or one that consumes a significant share of your gross profit, matters more than any benchmark figure.
When should I write off a bad debt?
When recovery is genuinely unlikely and further pursuit costs more than it is likely to return. Setting a defined trigger — an age, a failed escalation, an insolvency event — keeps the decision deliberate rather than letting uncollectable balances sit in the aging report indefinitely.
Can I reclaim tax on a bad debt?
Many jurisdictions allow relief for tax already accounted for on a sale that is subsequently written off, usually subject to conditions about how old the debt is and what steps you took to recover it. The rules and timing differ, so check the position where you are registered.
Put the number on an invoice
The free invoice generator builds the document around your figures — line items, tax, payment terms — and downloads a print-ready PDF. No signup required.
Related calculators
- AR Aging CalculatorEnter outstanding invoices to see current, 1–30, 31–60, 61–90, and 90+ day receivable balances.
- Collection Effectiveness Index CalculatorScore how much of available receivables you actually collected.
- DSO CalculatorCalculate Days Sales Outstanding to see how accounts receivable compares with credit sales.
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