Percentage of Sales Method
To use the percentage of sales method, you will need to know your credit sales. Credit sales are the sales you made on credit, not in cash. You can find this on an income statement.
If you can’t find your credit sales on your income statement, you can calculate it by using the formula below.
Credit Sales = Total Sales - Cash Sales
For example, let’s say your business generated $50,000 worth of sales and $25,000 of that was cash sales. Credit sales in this case would be $25,000.
You should calculate your credit sales for at least 3 to 5 years.
You need to figure out how many sales were uncollectible for each year.
Once you have this information, download this Google sheet https://docs.google.com/spreadsheets/d/1boop4i8mnD9kDkJnjIPzDXN9XhJRCr7PzKta3GTOUTY/edit?usp=sharing and plug-in all your data.
This will calculate your total uncollected credit sales and its percentage.