So, tell me if this sounds familiar: You’ve nailed a project, handled the kids’ chaos, and maybe even managed to eat lunch—only to realize that payment you were expecting? Still missing. Ever wonder why you have to chase down your own money, while juggling 10 other things?
A staggering 72% of freelancers report having invoices that clients have never paid. The total amount of outstanding invoices often exceeds $50,000 for many freelancers
Wasn’t freelancing supposed to give you freedom, not make you a bill collector? And don’t even mention that invoice from last month—you know, the one you’re still waiting on while your electric bill looms. Knowing how to calculate bad debt expense with accounts receivable might not seem important at first, but when you have unpaid bills, it really helps.
Yeah, we’ve all been there. Let’s figure out how to handle unpaid bills without losing our sanity.
What’s The Deal With Unpaid Bills? (Explaining Without Jargon)
Let’s start with the basics. When we talk about “unpaid bills”,or “accounts receivable” we’re really referring to money you’re owed but haven’t received yet. Maybe you’ve done some freelance work and are waiting on a payment, or perhaps a family member borrowed money and hasn’t paid it back. How to calculate bad debt expense with accounts receivable becomes essential when you have numerous outstanding payments that affect your cash flow.
How Busy Moms Can Overlook Missing Payments?
- You forget about an invoice you sent weeks ago, or perhaps you didn’t send it at all. (Forgive and forget; you took it seriously.)
- A family member borrows money and never pays you back.
- Utility bill < keeping track of kids’ schedules (because obviously, the latter is way more important!
- You lose track of unpaid invoices while budgeting, relatable?
- A client goes quiet after promising to pay.
- You forget to set reminders for bill due dates.
- You do a favor for a friend and don’t get paid for it.
Signs You May Have Unpaid Bills
| Signs | What It Means |
|---|---|
Late or Missing Payments (Payments that are due but haven’t been received.) | You sent out an invoice weeks ago, but you haven’t received the payment yet. |
Unpaid Invoices Stacking Up (Several invoices remain unpaid, even though the work is done.) | You have multiple invoices that are still unpaid, affecting your cash flow. |
Unclear or Disorganized Records (Financial records are messy, making it hard to track who owes what.) | Your financial records are messy, making it hard to see who owes you what. |
Rushed or Missed Bill Payments (Your own bill payments slip through the cracks.) | You’ve missed your own bills because you’re too busy tracking unpaid invoices. |
These signs don’t mean you’re bad at managing your finances – they’re just part of the chaos that comes with running a business and a family at the same time. We’ll drop some free tools to make this journey a breeze! Stay tuned and keep reading!
Keeping track of unpaid bills doesn’t have to be complicated—it just needs to fit into the busy lifestyle of a mom.
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Why Unpaid Bills Throw Off Your Budget (and How To Spot Them Before They Cause Stress)
Unpaid bills can really throw a wrench in your carefully crafted budget, and the impact can be far-reaching.
The Independent Economy Council found that a large number of freelancers, especially women, are waiting on significant sums. Approximately 59% of respondents reported being owed $50,000 or more in outstanding payments. This delay can have a profound impact on financial stability, especially for single mothers or caregivers.
Here is the Real Impact of Unpaid Bills:-
- Family Meals At Risk: An unpaid invoice could mean delaying grocery shopping, which affects your family meals. With food prices up by 13.5% in the past year, stretching your budget is more critical than ever.
- Medical Emergencies: Missing payments can lead to uncertainty around doctor visits. A study revealed that 30% of parents delay medical appointments due to financial concerns, risking their family’s health.
- Car Repairs On Hold: When you’re waiting for a client payment, you might defer essential car repairs, jeopardizing your family’s safety and mobility.
Pro Tip: Learn how to calculate bad debt expense with accounts receivable to spot unpaid bills early.
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This eBook provides practical tips and strategies that have helped many moms regain control over their budgets – consider checking it out!
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Here’s What You Can Do When A Bill Isn’t Paid
Let’s say the worst happens, and a payment you were expecting doesn’t arrive. It’s disappointing, but it’s not the end of the world. Here’s a simple step-by-step process to handle unpaid bills without letting them stress you out:
1. Send a polite reminder:
For invoicing, take advantage of tools like Google Calendar, Wave (Starter Plan is free of cost) , or QuickBooks (Free trial for 30 days) to schedule automatic reminders. Sometimes people forget or get caught up in other things. A quick, friendly reminder can work wonders. For example:
- “Hi! Just following up on the payment for the project we completed last month. Let me know if there are any issues!”
2. Offer a payment plan:
If the person owes you a larger amount, they might be struggling to pay it all at once. In that case, propose smaller installments.
- “I understand things can be tight. How about we split the payment into two parts to make it easier?”
3. Know when to cut your losses:
Sometimes, no matter how many reminders you send, the payment won’t come through. This is where you account for it as a bad debt expense. Writing it off means accepting that the money won’t arrive, but it also allows you to adjust your budget to reflect reality.
Hop into our Facebook group where savvy moms spill the tea on unpaid bills and share laughs. You’ll find support, tips, and maybe even a meme or two to brighten your day!
Preventing Unpaid Bills In The Future (Practical and Easy Solutions)
The best way to handle unpaid bills is to avoid them in the first place. Here are some smart Tips to Stay Ahead of Unpaid Bills:-
- Set Up Automated Bill Payments: Instead of relying solely on calendar reminders, consider using automated bill payments for fixed expenses (like utilities). This ensures you never miss a due date and can help you avoid late fees. Just remember to keep an eye on your account balance!
- Create A “Pending Payments” Section In Your Budget: Dedicate a section of your budget to unpaid invoices. List out what’s due and when you expect to receive payment. This visual cue can help you stay on top of your finances.
- Use A Payment Tracking System: Invest in simple tools like Google Sheets or Excel to create a tracking system for unpaid invoices. This allows you to see what’s outstanding at a glance. You can even color-code items to prioritize follow-ups!
- Implement A 30-Day Follow-Up Rule: If you haven’t received a payment after 30 days, send a friendly reminder. Consider a template email you can quickly customize, making follow-ups a breeze.
- Establish Clear Payment Terms With Clients: When starting new projects, clearly outline payment terms (e.g., 50% upfront, 50% upon completion). This sets the expectation for timely payments and minimizes surprises.
- Utilize Budgeting Apps With Invoice Features: Apps like FreshBooks not only help with expense tracking but also allow you to send invoices and set reminders, all in one place. They can significantly streamline your financial management.
- Ask For A Deposit Or Contract: For larger projects or amounts, it’s smart to ask for a deposit before starting work. You can also create a simple agreement outlining payment terms—it doesn’t need to be complicated.
No budget? No problem! Read our quick guide on different budgeting methods and start taking charge of your money now!
Free and Hassle-Free Tools To Track Unpaid Bills
| Tool | Price | Description |
|---|---|---|
Free | Free invoicing and payment tracking software with no hidden fees. | |
Free for 5; paid plans start at $9/month | Invoice creation with automated reminders; free for up to 5 customers. | |
Google Sheets | Free | Customizable invoice tracker with free templates, accessible anywhere. |
Free; paid plans start at $9/month | Simple online invoicing with easy setup and basic features for free. | |
Microsoft To Do | Free | Task manager for bill reminders, easy to use on mobile and desktop. |
Free; paid plans start at $5/month | Visual tool for tracking bills with customizable boards. | |
Free to send invoices; fees apply | Send invoices easily; quick setup with transaction fees for payments. |
A Simple Formula To Calculate Bad Debt Expense
If you’re trying to figure out how you calculate bad debt expense with accounts receivable, start by analyzing which receivables are overdue and estimate a reasonable percentage for potential defaults.
Why Calculate Bad Debt Expense?
Calculating bad debt expense helps you estimate how much of your accounts receivable (the money people owe you) might be lost. This keeps your finances realistic and your budget intact.
Bad Debt Expense = Total Accounts Receivable × Estimated Percentage of Uncollectible Amounts
Imagine you’re a freelance mom, and your total accounts receivable is $2,000. Based on past experience, you estimate that 10% of this amount won’t be collected because, well, life happens!
Let’s Crunch The Numbers!
| Item | Amount |
|---|---|
Total Accounts Receivable | $2,000 |
Estimated Percentage of Uncollectible Amounts | 10% (0.10) |
Calculation | $2,000 × 0.10 |
Bad Debt Expense | $200 |
So, in this example, you’d need to adjust your budget to reflect that $200 may never arrive. Knowing this allows you to make more informed financial decisions—like whether to treat yourself to that much-needed coffee or save for a family outing!
Pro Tip: Aim to set aside at least $200 each month for unexpected expenses. This fund can cover missed payments, allowing you to keep your essential spending uninterrupted.
You’ve Got The Tools – Now Take Action!
Calculating bad debt expense isn’t about being a Negative Nancy; it’s just being realistic. Think of it as your financial life jacket—because we all know it’s a wild ride out there!
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FAQs
What is the bad debt expense in accounts receivable?
It’s the estimated loss from accounts receivable that a company doesn’t expect to collect.
How to calculate bad debt expense using the percentage of receivables method?
Multiply total accounts receivable by a set percentage based on historical losses.
How is bad debts expense calculated using the aging of accounts receivable approach?
Categorize receivables by age and apply different percentages to estimate uncollectible amounts.
Is bad debt debited in the receivables account?
No, bad debt is debited to the bad debt expense account, not the receivables account.
