Glossary · Funding
What is Bad debt
Definition
Invoiced revenue that will never be collected. In contract staffing it is doubly painful because the contractor has already been paid.
Applies to: US and UK · Reviewed by James Doyle
In practice
A $50,000 unpaid invoice at 25% gross margin costs the agency $37,500 of real cash, not $12,500 of profit. That is why credit checking a new client matters more than the size of the first order.
Watch dilution too — credit notes and timesheet disputes reduce what a funder will advance even when the client eventually pays in full.
Related terms
Recourse
Who carries the loss when a client does not pay. Under recourse funding the agency buys the debt back; under non-recourse the funder absorbs approved credit losses.
ReadDSO
Days sales outstanding: the average number of days between invoicing a client and being paid. Every extra day is cash you have to fund.
ReadInvoice factoring
Selling your unpaid invoices to a funder at a discount for immediate cash. The funder advances most of the invoice value, then pays the balance on settlement.
Read
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