---
title: Collectibility Assessment
description: The Step 1 requirement stating a contract does not exist unless it is probable the entity will collect the consideration it is entitled to. Revenue ca...
sidebar_position: 51
tags: ['asc-606', 'Revenue']
---

# Collectibility Assessment

## The ASC 606 Standard

The Step 1 requirement stating a contract does not exist unless it is probable the entity will collect the consideration it is entitled to. Revenue cannot be recognized if the customer is completely unable to pay.

## The Real-World Scenario

You sign a massive deal with a company that is publicly on the verge of bankruptcy and has already defaulted on previous invoices.

## The Spreadsheet Breaking Point

Manually cross-referencing new enterprise deals with the client's historical bad debt status in an AR spreadsheet leads to massive oversight.

## The Hidden Cost to the Bottom Line

Recognizing revenue from a customer who is virtually guaranteed to default inflates top-line metrics with phantom money.

## How GAAPX Eliminates the Risk

Automatically cross-references customer credit profiles and pauses revenue schedules systemically if collectibility thresholds fail.