A business sells on credit to attract and retain more customers. It highlights the need for accounts receivable management services. Credit sale means giving adequate time to customers to pay. However, it may become impossible to collect the total or partial amount from some debtors. Due to insolvency, cash shortage, or liquidity issues, they may not pay you on time. When businesses cannot collect their money from debtors, despite several efforts, then it comes under the category of bad debts. 
Bad debts are the worst enemies of a business. However, they can occur despite the firms’ diligence. When the debt becomes uncollectible, it becomes an expense. It is a contingency every business must consider.  It can happen due to the following reasons:
Credit extended to an unsuitable customer
Fraud where business gets targeted by criminals
Customer/ debtor became insolvent or bankrupt
In any case, businesses need to follow a stringent credit policy. Background checks are highly essential before extending credit. Firms must constantly follow up on debts overdue or about to be due. The accounts receivable management services must ensure they deal with good customers. Tracking crucial metrics allow firms to measure their receivables’ performance timely and reliably. 
Bad debts treatment:
The bad debts treatments can get classified in the following ways:
Write off 
Provision
Write-off method: Under this practice, businesses deduct the amount uncollectible from the receivables in the balance sheet and add bad debt as an expense in the income statement. Because firms know the specific amount, write-off becomes an appropriate choice. Journal entry in financial accounting for the same is:
Bad debts A/c (Debit)
To Accounts receivable account (Credit) It is suitable for irrecoverable debts. 
Bad debts provision: Businesses can also create a provision for bad debts. Provision is a reserve with estimated amounts that they think can become uncollectible. It can be a percentage of something (like sales, etc.). Here, firms create a provision (liability) of an estimated amount and write off actual bad debts when they occur. It allows them to show an accurate financial picture in real-time.