How does 360 Painting determine the allowance for doubtful accounts regarding accounts receivable?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 21: FINANCIAL STATEMENTS]
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 appears doubtful. As of December 31, 2024 and 2023, the allowance for doubtful accounts was $140,839 and $232,343, respectively. During the years ended December 31, 2024 and 2023, the Company had write-offs of uncollectable accounts of $522,191 and $106,971, respectively.
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. To determine the allowance for doubtful accounts, 360 Painting's management assesses the current status of individual accounts. When collection of the amounts appears doubtful, these uncollectible accounts are written off against the allowance.
As of December 31, 2024, the allowance for doubtful accounts was $140,839, while on December 31, 2023, it was $232,343. During the year ending December 31, 2024, 360 Painting had write-offs of uncollectible accounts totaling $522,191. In the year ending December 31, 2023, the company wrote off $106,971 in uncollectible accounts.
This information is relevant for prospective franchisees as it provides insight into how 360 Painting manages its accounts receivable and handles potentially uncollectible debts. Understanding the company's approach to doubtful accounts can help franchisees assess the financial health and stability of the franchisor. It also highlights the importance of franchisees managing their own accounts receivable effectively to minimize potential losses from uncollectible accounts.