Write-off
Removing an invoice balance from accounts receivable because it won't be collected, charging it to bad debt expense or the allowance for doubtful accounts.
Write-offs happen when collection is no longer realistic: the customer has gone out of business, pursuing a small balance would cost more than it's worth, or a deduction was accepted without a credit memo.
Small-balance write-offs deserve attention because they add up. A policy with clear thresholds and approvals keeps them a deliberate decision rather than the default for anything nobody had time to chase.
Related terms
- Bad debt expenseThe cost of receivables a business doesn't expect to collect, recognized as an expense on the income statement.
- Allowance for doubtful accountsA reserve for the share of receivables a business estimates it won't collect, shown as a reduction of the receivables balance.
- Bad debt recoveryCollecting payment on an account that was previously written off as uncollectible.
- Short paymentWhen a customer pays less than the full invoice amount, leaving a balance that needs to be explained, accepted or collected.