I would be amazed to find a business owner who says they have never had bad debt, because more often than not, it’s happened to everyone, including myself. With the issue of bad debt, especially in this bad economic downturn we’ve went through, it’s important that we all consider budgeting for it because at one point or another, it’s going to be inevitable if we offer credit to anyone. Unfortunately if you’re on a cash basis of account (you count the money as income when you receive it, and you count the money when it’s gone to expenses), we cannot deduct bad debt expense, for which most small businesses utilize for their accounting method. However it’s important to still work it into your budget for planning and preparation purposes.
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