How does Bumper Man determine the reserve for bad debt?
Bumper_Man Franchise · 2025 FDDAnswer from 2025 FDD Document
g principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Bad Debts
The Company uses the reserve for bad debt method of valuing doubtful accounts receivable which is based on historical experience, coupled with a review of the current status of existing receivables. The balance of the reserve for do
Source: Item 23 — RECEIPTS (FDD pages 45–180)
What This Means (2025 FDD)
According to Bumper Man's 2025 Franchise Disclosure Document, the company uses the reserve for bad debt method to value doubtful accounts receivable. This valuation is based on a combination of historical experience and a review of the current status of existing receivables.
As of December 31, 2024, the balance of the reserve for doubtful accounts was $159,129. This amount is deducted from trade accounts receivable to accurately reflect the realizable value. The reserve balances for the prior two years were $129,645 on December 31, 2023, and $120,787 on December 31, 2022.
For a prospective Bumper Man franchisee, this means that Bumper Man is actively accounting for potential uncollectible debts. The increasing reserve balances from 2022 to 2024 may indicate a trend in uncollectible receivables, which could be due to various factors such as economic conditions or changes in customer payment behavior. Understanding how Bumper Man manages and accounts for bad debt can provide insight into the financial health and stability of the franchise system.