In one line
Removing an unpaid invoice from what you expect to collect, while keeping it in the record.
Also called writing off a debt or booking a bad debt expense.
What it means in practice
A write-off is the accounting side of accepting a bad debt. The invoice stays in the history, the receivable comes off your books, and the loss is recorded where your accountant can see it.
Do it deliberately and at a set point, such as at 120 days or when a claim fails, rather than by letting the invoice drift down the aging report forever.
Covered in full in the guide to chasing an unpaid invoice.
Example. A $1,400 invoice from a dissolved company written off at the end of the quarter.
Where it shows up on the paperwork
A write-off changes your records rather than any document the client holds. The invoice stays as issued; the receivable comes off your books.
What goes wrong
- Writing off quietly and then still chasing, which wastes the time the write-off was meant to save.
- Letting invoices drift down the aging report forever instead of setting a point at which they are written off.
- Writing off without telling your accountant, so the year-end numbers do not match the ledger.
The tools for this
Related terms
- Bad debtAn invoice you have decided you are not going to collect.
- Credit noteA document that cancels all or part of an invoice you have already issued.
- Accounts receivableThe money your clients owe you on invoices you have sent but not yet been paid for.
Common questions
When should I write off an unpaid invoice?
At a point you set in advance, such as 120 days or after a failed claim. Making it a rule stops it becoming a mood.
Does writing off an invoice mean I cannot collect it later?
No. It is an accounting decision, not a legal one. If the money turns up afterwards it goes back into the books as a recovery.