What is the bad debt percentage formula?

Bad Debt Percentage = (Bad Debt Amount ÷ Denominator) × 100. The default denominator is net credit sales. You can also divide by accounts receivable when you want write-offs as a share of the receivable balance.

Should I use credit sales or accounts receivable as the denominator?

Credit sales is the more common base for a period’s uncollectible percentage. Using accounts receivable answers a different question: what share of the receivable balance was written off. Keep the two modes separate when you compare results.

What if credit sales or accounts receivable is zero?

The percentage is not defined when the denominator is zero. This calculator will not invent a result—enter a denominator greater than zero for the mode you selected.

Is there a good or healthy bad debt percentage?

No universal target applies. Percentages vary by industry, customer mix, credit policy, and economic conditions. Compare against your own history and payment terms rather than a generic benchmark.

How does bad debt percentage relate to collections performance?

A rising write-off rate can signal weaker collections, looser credit approval, or tougher customer conditions. Pair it with aging, DSO, turnover, and collection effectiveness metrics for a fuller picture.

Bad Debt Percentage Calculator

See what share of credit sales or receivables was written off as bad debt.

Denominator

Choose whether write-offs are measured against credit sales or against the receivable balance.

Currency

Display only. Amounts are not converted between currencies.

Bad debt expense / amount written off

Write-offs or bad debt expense recognized for the same period.

Total credit sales for the period

Net credit sales for the same period (after returns and allowances).

Bad debt percentage

2.5%

Based on $12,500.00 written off against $500,000.00 in credit sales.

About 2.5% of credit sales were written off as bad debt.

Bad debt amount: $12,500.00
Credit sales: $500,000.00
Credit sales not written off: $487,500.00
Bad debt percentage: 2.5%

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What is bad debt percentage?

Bad debt percentage measures what share of credit sales (or receivables) became uncollectible during a period. It turns write-offs into a rate so you can watch credit risk and collections over time.

There is no universal “good” or “healthy” percentage. Results vary by industry, customer mix, credit policies, and economic conditions. Compare against your own history rather than a generic benchmark.

How to calculate bad debt percentage

Find bad debt expense or the amount written off for the period.
Choose a denominator: net credit sales (default) or accounts receivable.
Divide the write-off amount by that denominator.
Multiply by 100 to express the result as a percentage.

Bad debt percentage formula

Bad Debt Percentage = (Bad Debt Amount ÷ Credit Sales) × 100

Or, when measuring against receivables: Bad Debt Percentage = (Bad Debt Amount ÷ Accounts Receivable) × 100

Credit sales: $500,000. Write-offs: $12,500.

$12,500 ÷ $500,000 = 0.025

0.025 × 100 = 2.5%

Credit sales not written off = $500,000 − $12,500 = $487,500.

Bad debt expense vs. accounts receivable

Bad debt expense (or write-offs) is the amount recognized as uncollectible. Accounts receivable is the outstanding balance customers still owe. Dividing write-offs by credit sales answers how much of period sales went bad. Dividing by AR answers how much of the receivable balance was written off.

Use one mode at a time and keep the labels clear when you compare periods.

Why businesses track bad debt

Tracking write-offs as a percentage helps credit and collections teams see whether uncollectible amounts are rising relative to sales or receivables. It supports credit-policy reviews, allowance estimates, and conversations about customer risk—without treating any single percentage as a universal target.

Bad debt percentage and collections performance

Bad debt percentage is a write-off rate, not a speed metric. Pair it with aging, days sales outstanding, turnover, and collection effectiveness to see both how fast you collect and how much you ultimately lose.

See balances by age in the AR Aging Calculator, days to collect in the DSO Calculator or Average Collection Period Calculator, and collection frequency in the Accounts Receivable Turnover Calculator.

Practical example

A wholesale supplier books $500,000 in net credit sales and writes off $12,500 of invoices that customers will not pay. Bad debt percentage is 2.5% of credit sales, leaving $487,500 of that sales base not written off. Whether that rate is acceptable depends on the supplier’s margins, credit policy, and history—not a published “healthy” target.

Frequently asked questions

What is bad debt percentage?: Bad debt percentage is the share of credit sales (or accounts receivable) written off as uncollectible during a period. It is usually shown as Bad Debt Amount ÷ Credit Sales × 100.
What is the bad debt percentage formula?: Bad Debt Percentage = (Bad Debt Amount ÷ Denominator) × 100. The default denominator is net credit sales. You can also divide by accounts receivable when you want write-offs as a share of the receivable balance.
Should I use credit sales or accounts receivable as the denominator?: Credit sales is the more common base for a period’s uncollectible percentage. Using accounts receivable answers a different question: what share of the receivable balance was written off. Keep the two modes separate when you compare results.
What if credit sales or accounts receivable is zero?: The percentage is not defined when the denominator is zero. This calculator will not invent a result—enter a denominator greater than zero for the mode you selected.
Is there a good or healthy bad debt percentage?: No universal target applies. Percentages vary by industry, customer mix, credit policy, and economic conditions. Compare against your own history and payment terms rather than a generic benchmark.
How does bad debt percentage relate to collections performance?: A rising write-off rate can signal weaker collections, looser credit approval, or tougher customer conditions. Pair it with aging, DSO, turnover, and collection effectiveness metrics for a fuller picture.

Check aging with the AR Aging Calculator, DSO with the DSO Calculator, collection effectiveness with the Collection Effectiveness Index Calculator, turnover with the Accounts Receivable Turnover Calculator, and days to collect with the Average Collection Period Calculator.