Cleanworks Services Pty Ltd is a provider of commercial cleaning services for commercial venues such as offices and bars. Commercial businesses throughout Australia engage Cleanworks Services for their daily and weekly cleaning needs including big clean ups related to corporate events and functions. These businesses also purchases cleaning products such as trash supplies, bar towels and even sanitation kits.

The COVID-19 pandemic has hit offices and bars particularly hard, with lock downs forcing the closures of offices and bars across different states in Australia. For Cleanworks Service, this has meant that clients have cut back requesting cleaning services as much as possible (especially with remote working). Many clients are experiencing great financial difficulty and have delayed paying amounts owed to Cleanworks Services. In the context of this case, please answer the following questions:

(2) Cleanworks Services management have been actively pursuing clients who fail to pay invoices when they fall due. Based on the experience of Cleanworks Services in this financial year which ends on June 30, 20% of clients (based on sales revenue) have not and cannot pay their invoices when they fall due. These clients typically close their businesses (especially with the overall reduction in business activity) and can never pay amounts due to Cleanworks Services.

Identify the method and approach that is appropriate to account for bad debts in this case, justifying why the method and approach you have identified is appropriate.