Every business has one. An invoice from eighteen months ago that everybody knows is not coming, still sitting in receivables because writing it off feels like giving up.
What keeping it actually costs
Your receivables total is wrong, so any decision based on it is wrong. Your ageing report has a permanent lump at the far end that makes the real problem harder to see. And somebody, occasionally, still spends an afternoon chasing it.
Worst of all, it flatters your figures. You believe you are owed more than you are.
Signs it is over
- No contact for six months despite several attempts
- The business has closed or the person has moved on
- Cost of recovery is close to or above the amount
- You have already decided you would not take work from them again
The last one is the honest test. If you would not sell to them, you are not maintaining a customer relationship. You are maintaining a hope.
Writing it off is not forgiving it
This is the part people misunderstand. A write-off is an accounting entry that corrects your books. It does not cancel the debt, and it does not stop you accepting the money if it turns up later.
Talk to your CA about the tax treatment and the GST position, because both depend on circumstances and both matter.
Then use what it taught you
Every bad debt started as a decision. Credit extended without a check, work continued past a missed payment, an invoice that went to the wrong person for two months.
Write off the money, but do not write off the lesson. Look at what you would need to have known in month one, and put that check into your process.
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