How does Buildingstars maintain its allowance for credit losses related to accounts receivable?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable are carried net of allowance for credit losses. The allowance for credit losses is increased by provisions charged to expense and reduced by accounts charged off, net of recoveries. The allowance is maintained at a level considered adequate to provide for potential account losses based on management's evaluation of the anticipated impact on the balance of current economic conditions, changes in the character and size of the balance, past and expected future loss experience and other pertinent factors.
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 34–43)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, the company carries accounts receivable net of an allowance for credit losses. This allowance is increased by provisions charged to expense and decreased by accounts charged off, net of any recoveries.
Buildingstars maintains this allowance at a level it considers adequate to cover potential account losses. This determination is based on management's evaluation, which takes into account several factors. These factors include the current economic conditions, changes in the characteristics and size of the accounts receivable balance, historical loss experience, expected future losses, and any other relevant information.
For a prospective franchisee, this means that Buildingstars actively manages its risk related to unpaid accounts. The allowance for credit losses is a financial buffer that Buildingstars uses to absorb potential losses from franchisees or customers who may not pay their dues. By regularly evaluating and adjusting this allowance, Buildingstars aims to present a more accurate picture of its financial health and stability.