What method does Focus Cfo use when a receivable is deemed uncollectible?
Focus_Cfo Franchise · 2025 FDDAnswer from 2025 FDD Document
Accounts receivable are comprised solely of invoices to clients receiving CFO services. The Company continually monitors the balances and has a strong history of collections. Additionally, the receivable is offset by the accrued compensation payable to the franchisees and licensees for services provided to the clients. The payable is not paid to the franchisees and licensees unless payment is received from clients. Based on this, management believes the accounts receivable as of December 31, 2024 and 2023 are fully collectible and any estimate for loss is immaterial to the consolidated financial statements. When a receivable is deemed uncollectible, the Company uses the direct write-off method.
Source: Item 23 — Receipts (FDD pages 37–126)
What This Means (2025 FDD)
According to the 2025 Focus Cfo Franchise Disclosure Document, Focus Cfo uses the direct write-off method when an account receivable is deemed uncollectible. This means that when Focus Cfo determines that a client invoice will not be paid, the company directly reduces the value of the receivable on its balance sheet and recognizes the bad debt expense in its income statement.
This practice is fairly straightforward and commonly used, especially by smaller businesses. The direct write-off method is simple to implement because it doesn't require estimating bad debts in advance. However, it may not always accurately reflect the financial health of the company, as it recognizes losses only when an account is deemed uncollectible, rather than when there is a likelihood of non-payment.
For a prospective Focus Cfo franchisee, this means that Focus Cfo handles the write-off of uncollectible receivables at the corporate level using the direct write-off method. The FDD states that franchisees and licensees are not paid unless Focus Cfo receives payment from clients, which mitigates the risk to the franchisee. This policy protects the franchisee's compensation, as it is tied directly to successful collections by Focus Cfo.