How does 360 Painting determine the allowance for doubtful accounts?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
ty recognized at the acquisition date (including measurement-period adjustments) are classified as financing activities; any excess is classified operating activities. The Company did not pay any contingent consideration during the years ended December 31, 2024 or 2023.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management determines the allowance for doubtful accounts based on its assessment of the current status of individual accounts. Uncollectible accounts are written off against the allowance when collection of the amounts
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 56)
What This Means (2025 FDD)
According to 360 Painting's 2025 Franchise Disclosure Document, the company states accounts receivable at the amount that management expects to collect from outstanding balances. The allowance for doubtful accounts is determined by management based on their assessment of the current status of individual accounts. Accounts deemed uncollectible are written off against the allowance when collection appears doubtful.
As of December 31, 2024, the allowance for doubtful accounts was $140,839, while it was $232,343 as of December 31, 2023. During the year ending December 31, 2024, 360 Painting had write-offs of uncollectible accounts totaling $522,191, compared to $106,971 during the year ending December 31, 2023.
For a prospective 360 Painting franchisee, this means that the franchisor's financial statements reflect an estimation of potential uncollectible revenue. The method of determining this allowance is based on management's judgment of the status of specific accounts. Franchisees should be aware of how these estimations and write-offs can impact the franchisor's financial health, as well as the importance of understanding the franchisor's credit and collection policies.