Glossary · Collections
Write-off
A write-off removes an uncollectable invoice from accounts receivable and records the amount as a loss.
Writing off an invoice moves it out of receivables, where it counts as an asset, into expenses as a bad debt. It is done when the money won’t come: insolvency, a settled dispute, or a balance too small to be worth chasing.
Small write-offs are routine. Most firms set a threshold — a few euros of bank charges or a rounding difference — below which differences are written off without approval. Larger write-offs should need sign-off, and the reason should be recorded.
A write-off is an accounting entry, not a waiver. Unless you have agreed to forgive the debt, the customer still owes it, and a recovery later is simply booked as income.
Example
A customer short-pays a $3,000 invoice by $18 in wire fees. The supplier’s tolerance is $25, so the $18 is written off automatically and the invoice closes.