It is an accounting estimate, usually a percentage applied to each aging bucket (higher for older buckets). It does not change what you collect; it changes how honestly the balance sheet states what you will collect. A growing over-90 bucket should show up here before it shows up as a surprise.
Glossary
Allowance for doubtful accounts
Also: bad debt reserve
The allowance for doubtful accounts is an estimate, recorded against receivables, of the portion of open invoices that will not be collected.
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