How do you assess whether a target's bad-debt provision is adequate, and what does an aged receivables analysis reveal?

You age the receivables — bucketing balances by how overdue they are (current, 30/60/90/120+ days) — and assess collectability against that profile, the provisioning policy, and the historical loss/write-off experience. Signs of an inadequate provision: a growing tail of long-overdue balances not provided for, customers in known difficulty, a provision that's been falling as a percentage of receivables while ageing worsens (a way to flatter profit), or write-offs consistently exceeding the provision. You'd also check cash collections post-period (did the year-end debtors actually pay?), concentration in a few accounts, disputes and credit notes, and whether revenue recognized has actually converted to cash (tie to the proof of cash). Why it matters: an under-provision overstates both profit (EBITDA, if bad-debt sits above the line) and net assets, and a buyer inherits the collection risk — so it can become a QoE adjustment, a net-debt/working-capital item, or an SPA warranty/indemnity. The ageing tells you the real recoverability behind the headline receivables balance.