What constitutes 'unbilled accounts receivable' for Big Blue Swim School, and how are they treated?
Big_Blue_Swim_School Franchise · 2025 FDDAnswer from 2025 FDD Document
s. Actual results could differ from those estimates.
Accounts receivable
Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of some of its franchisees to make required payments. Unbilled accounts receivable, which are included in accounts receivable, represent amounts for which the Company has an unconditional right to receive payment for, although invoicing is subject to contractual billing requirements. The Company assesses collectability by reviewing accounts receivable and its contract assets on a collective basis where similar risk characteristics exist. In determining the amount of the allowance for doubtful accounts, management considers historical collectability and makes judgments about the creditworthiness of the pool of franchisees based on credit evaluations. Current market conditions and reasonable and supportable forecasts of future economic conditions are considered in adjusting the historical losses to determine the appropriate allowance for doubtful accounts. Uncollectible accounts are written off when all collection efforts have been exhausted.
BIG BLUE SWIM SCHOOL FRANCHISING, LLC
(A Limited Liability Company) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024, 2023 AND 2022
NOTE 2.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 75)
What This Means (2025 FDD)
According to the 2025 Big Blue Swim School FDD, unbilled accounts receivable are amounts for which Big Blue Swim School has an unconditional right to receive payment, but invoicing is subject to specific contractual billing requirements. These unbilled receivables are included within the broader category of accounts receivable on Big Blue Swim School's financial statements. Big Blue Swim School assesses the collectability of these receivables, along with its contract assets, by reviewing them collectively based on similar risk characteristics. This means they group franchisees with similar financial risk profiles together for evaluation.
To determine the allowance for doubtful accounts, Big Blue Swim School's management considers historical collectability data and makes informed judgments about the creditworthiness of its franchisees. These judgments are based on credit evaluations, which likely involve analyzing franchisees' financial health and payment history. Furthermore, Big Blue Swim School incorporates current market conditions and forecasts of future economic conditions to adjust historical loss data, ensuring the allowance for doubtful accounts accurately reflects the current economic climate. This is a standard accounting practice, as economic downturns can increase the risk of franchisees defaulting on payments.
Big Blue Swim School had an allowance for credit losses of $- as of December 31, 2024, and $100,000 as of December 31, 2023. When all collection efforts have been exhausted and an account is deemed uncollectible, Big Blue Swim School writes off the account. This means they remove it from their accounts receivable and recognize it as a loss. For a prospective franchisee, this indicates that Big Blue Swim School actively manages its accounts receivable and takes steps to account for potential losses, which is a sign of sound financial management.