Record Bad Debt the Right Way
Sometimes clients don't pay. Whether they've gone silent, their business has closed, or the amount is simply not worth pursuing, a write-off lets you close an unpaid invoice and record it as a loss. This keeps your books accurate without chasing payments you'll never receive.
What is a Write-Off?
A write-off is an accounting action that removes an outstanding balance from your accounts receivable and records it as a business expense, often called bad debt expense. Unlike a credit note, a write-off is an internal decision that acknowledges you won't be collecting the money owed.
The original invoice remains in your records for reference, but the outstanding amount is zeroed out and the expense is reflected in your financial reports.
When to Use a Write-Off
Write-offs are typically used when:
- Non-responsive client – The client has stopped responding to payment reminders and follow-ups.
- Refusal to pay – The client disputes the invoice and refuses to pay despite your efforts to resolve the issue.
- Business closure – The client's business has closed, gone bankrupt, or is otherwise unable to pay.
- Cost exceeds value – The cost of collecting the payment (legal fees, time spent) exceeds the invoice amount.
- Goodwill decision – You've decided to forgive the debt as a business decision, such as maintaining a relationship with a long-term client.
Before You Begin
Make sure you have an approved invoice with an outstanding balance. Write-offs can only be added to invoices that are in Due, Overdue, or Partial Payment status.
How to Add a Write-Off
- 1 Navigate to Finance → Income and open the Invoices tab.
- 2 Click on the invoice you want to write off.
- 3 In the Quick Actions panel, click the Add Write Off button.
- 4 Review and fill in the required fields.
- 5 Click Add Write Off to save.
Once saved, the invoice balance updates immediately to reflect the write-off. If the write-off covers the full remaining balance, the invoice status changes to Paid (since no amount remains outstanding).
Understanding the Write-Off Fields
When you click Add Write Off, the form opens with some fields pre-filled:
- Write Off Date defaults to today's date. You can change this to reflect when the decision was made or when the debt became uncollectible.
- Amount is pre-filled with the remaining invoice balance. Adjust this if you're writing off only part of the amount.
- Remarks is required. Enter a clear explanation for why the write-off is being issued.
What Happens After Adding a Write-Off
Once a write-off is added, several things happen:
- The invoice balance updates to zero (or the reduced amount if partial).
- If the write-off covers the full remaining balance, the invoice status changes to Paid.
- The write-off appears as an entry in the Invoice Activity section.
- The write-off amount is recorded as bad debt expense in your accounting records.
The invoice document itself is updated to show the write-off line with the amount deducted, so your records reflect the full history of the transaction.
Partial Write-Offs
You don't have to write off the entire invoice amount. Partial write-offs are useful when:
- You've negotiated a reduced settlement with the client and want to write off the remaining balance.
- You've received partial payment and decided not to pursue the rest.
- You're writing off specific line items while keeping others collectible.
To add a partial write-off, simply adjust the Amount field to the portion you want to write off. The remaining balance will continue to show as outstanding on the invoice.
Viewing or Removing a Write-Off
You can manage write-offs from the Invoice Activity section on the invoice detail page:
- Click View to see the full write-off details, including the date, amount, and remarks.
- Click Remove to delete the write-off if it was added by mistake or if circumstances have changed.
Recovering a Written-Off Amount
Occasionally, a client may pay an invoice after it has been written off. If this happens:
- Remove the write-off from the Invoice Activity section.
- The invoice balance will be restored to its original amount.
- Record the payment as you normally would.
This ensures your records accurately reflect the payment received and reverses the bad debt expense that was previously recorded.
Frequently Asked Questions
Yes. Adjust the Amount field to write off only part of the invoice total. The remaining balance will still be shown as outstanding and can be collected, written off later, or adjusted with a credit note.
Yes. Each write-off is logged as a separate entry in the Invoice Activity. This is useful when you're writing off an invoice in stages, such as after multiple failed collection attempts over time.
A write-off records an unpaid amount as a loss (bad debt expense) when you don't expect to collect payment. It's an internal accounting action. A credit note reduces the amount owed and is typically shared with the client as an official document for discounts, refunds, or corrections.
Write-offs are recorded as bad debt expense in your Profit & Loss report, which reduces your net profit for the period. Your accounts receivable balance also decreases since the invoice is no longer considered collectible. This gives you a more accurate picture of your actual financial position.
Generally, no. Write-offs are internal accounting decisions and are not typically shared with clients. If you want to formally notify a client that you're forgiving their debt, consider issuing a credit note instead, which is designed to be shared as an official document.
No. Once a write-off is saved, it cannot be edited because it affects your accounting records. If you need to make changes, remove the existing write-off and create a new one with the correct details.
What's Next?
Now that you understand write-offs, explore these related guides:
- Adding a Credit Note – Adjust invoices for refunds or discounts when the client relationship is ongoing
- Recording a Payment – Mark invoices as paid when you receive funds
- Understanding Invoice Statuses – Track where each invoice stands in the payment cycle