Estimating how much subscriber debt won't be paid

How a telecom provider estimates the part of its subscriber debt that will never be collected, using the age bands and its own write-off history.

By Achekam · 11 October 2026 · 5 min read · For Telecoms businesses in South Africa, Nigeria, Kenya

Every provider carries some subscriber debt it will never see. A small business closes and its last few months of fibre go unpaid. A home subscriber moves away and stops answering. A customer disputes an old bill until it is no longer worth chasing. On the balance sheet, though, all of those invoices sit in trade receivables at full value until somebody decides otherwise.

Waiting until each debt is finally written off makes the books look better than they are for months, then dumps the loss into whichever month the decision is taken. A better approach is to estimate, each month or quarter, how much of what is owed is unlikely to be collected, and to show that estimate in the accounts. This article explains the two common estimating methods, how to build percentages from your own history, and how to record and test the result.

Two ways to estimate

Investopedia describes two methods, and its explanation of bad debt sets them side by side with how the entries are made.

The ageing method groups receivables by how long they have been outstanding and applies a percentage to each group. The percentage typically rises as the receivable gets older, because the longer a debt sits unpaid, the less likely it is to be paid.
The percentage of sales method applies a flat percentage, based on past experience, to the period's net sales. It estimates the bad debt expense for the period rather than the bad debts sitting in the balance today.

For a provider, the ageing method usually tells the truer story. Subscriber debt is concentrated in a long tail of small balances that grow older together, and the ageing method looks directly at that tail. The percentage of sales method is simpler and can be a useful cross-check, but it reacts slowly when collections deteriorate.

AccountingTools makes the same point about the ageing report's double use: a receivables ageing can be used to estimate total bad debt, and so to set the allowance for doubtful accounts, and it helps the credit department decide whether to give a customer more credit or less.

Building percentages from your own history

The percentages are the heart of the method, and they should come from your own subscribers, not from another provider or a textbook. To build them:

Take a past date, such as the end of a quarter a year or more ago, and list what was owed in each age band.
Follow each band forward. For the invoices in each band at that date, find out how much was eventually paid and how much was written off or is still unpaid with no realistic prospect of payment.
Work out the share lost per band. The amount lost in a band divided by the amount in that band at the start gives that band's loss percentage.
Repeat for several past dates and look at the range. A single quarter can be distorted by one large customer.

Keep residential and business subscribers apart if their behaviour differs. A provider whose business customers almost always pay eventually, but whose residential customers often disappear after a few unpaid months, needs two sets of percentages.

Applying them to the age bands

In Achekam, receivables are aged into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals. Those bands are where the percentages are applied.

Worked through in words: take the total in the 0-30 band and multiply it by your small current-band percentage; take the 31-60 band and multiply it by its somewhat higher percentage; and so on, up to the over-120 band, where your history may show that a large share is never collected. Add the results together. That total is the allowance you need at the end of the period: your best estimate of the receivables that will not turn into cash.

Before applying a percentage, look at the largest balances in the older bands one by one. A business customer in an agreed payment arrangement, or one whose dispute is about to be settled in your favour, may deserve a lower estimate than the band's average. A customer you know has closed down may deserve a higher one.

Booking the allowance with a journal

Investopedia explains that bad debt is recorded by debiting bad debt expense and crediting a contra-asset account called the allowance for doubtful accounts. The allowance sits beside trade receivables on the balance sheet and reduces them to the amount you expect to collect, while the individual subscriber balances stay intact so you can keep collecting them.

In Achekam, this is a manual journal. A business can post manual journals; an unbalanced journal, or one dated in a closed month, is refused, and a posted journal is corrected only by a reversal. Each period, compare the allowance you need with the balance already in the allowance account, and journal only the difference: a top-up if more is needed, a release if less is. Put the calculation in the journal's narration or keep it as a supporting schedule.

The management accounts then show the effect. They present an income statement for the period beside the period before and a balance sheet at period end, so a jump in bad debt expense, or a growing allowance against receivables, is visible to whoever reads the pack.

Checking the estimate against what was written off

An estimate is only useful if it is tested. In Achekam, an unpaid debt can be written off once a partner approves. Over time, compare the debts actually written off with the allowance that was held for them:

If write-offs keep exceeding the allowance, your percentages are too low.
If the allowance keeps being released unused, they are too high.
If one age band is consistently wrong, revisit that band's history.

Agree with your accountant how write-offs and the allowance are recorded in your chart of accounts, so a debt that was already provided for is not charged to expense a second time when it is finally written off. Who may approve write-offs and credits is covered in controlling credits and write-offs, and the choice between an allowance and an immediate write-off is explained in bad debt allowance or write-off.

Where to start

Find an age analysis from a quarter end about a year ago (a saved copy, or one your accountant prepared), mark which of those balances were eventually paid, and calculate one loss percentage per band. Even a rough first set of percentages gives a more honest balance sheet than none.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.