Credit Risk and Allowance for Doubtful Accounts

3 Months Ended

Mar. 31, 2016

Credit Risk and Allowance for Doubtful Accounts [Abstract]

Credit Risk and Allowance for Doubtful Accounts

(6) Credit Risk and Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.  This allowance is regularly evaluated by the Company for adequacy by taking into consideration factors such as past experience, credit quality of the customer base, age of the receivable balances, both individually and in the aggregate, and current economic conditions that may affect a customer’s ability to pay.  Accounts receivable over 30 days past due are considered past due.  The Company does not accrue interest on past due accounts receivable.  Receivables are written off only after all collection attempts have failed and are based on individual credit evaluation and the specific circumstances of the customer.  At March 31, 2016 and December 31, 2015, the allowance for doubtful accounts was $235,000 and $285,000, respectively.

All product returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge.  The Company analyzes the rate of historical returns when evaluating the adequacy of the allowance for sales returns, which is included with the allowance for doubtful accounts on its balance sheet.  At March 31, 2016 and December 31, 2015, the sales and return allowance was $80,000 and $75,000, respectively.

Accounts receivable are shown net of the combined total of the allowance for doubtful accounts and allowance for sales returns of $315,000 and $360,000 at March 31, 2016 and December 31, 2015, respectively.