How to write off bad debt (and when to)

Not every invoice gets paid. After enough chasing, there’s a point where the time and stress of pursuing a debt costs more than the debt itself. Writing it off isn’t failure — it’s a clean business decision. Here’s when and how.

When to call it

Consider writing off a debt when:

You’ve exhausted the steps — reminders, a demand letter, maybe a final warning — and there’s still no payment.
The amount is too small to justify legal action or a collections agency.
The client has gone under, vanished, or genuinely can’t pay.
Continuing to chase is damaging your time, focus or wellbeing more than the money is worth.

It’s a judgement call, not a rule. For a large sum it may be worth one more formal step or professional advice before giving up — and if the client is willing but cash-strapped, offering a payment plan often recovers more than writing the whole thing off.

What “writing off” actually means

Writing off bad debt means formally recording that you no longer expect to be paid, and removing the amount from your receivables. In practice:

Mark the invoice in your records as bad debt, with the date and reason.
Don’t just delete the original invoice — keep the trail. If you need to cancel the receivable on the books, a credit note is the clean way to do it.
There may be tax relief for bad debt depending on where and how you account — worth a quick check with your accountant, as the rules vary.

Decide, then stop

Once you’ve written a debt off, stop chasing it. Dragging it out drains energy you could spend on paying clients. Close it, record it, and move on.

Make the next one less likely

Bad debt is far cheaper to prevent than to recover. The habits that cut it down:

Take a deposit so you’re never fully exposed.
Use a clear contract with payment terms and consequences.
Chase early and consistently — see what to do when a client won’t pay — because debt that’s caught early rarely turns bad.

Catch problems before they become write-offs

Most bad debt is just an overdue invoice that no one followed up in time. Duefy chases every invoice automatically from the moment it’s late, so far fewer ever reach the point of being written off in the first place.