Write-Off

A write-off is a formal accounting entry that removes a receivable or asset from the balance sheet when recovery is no longer realistic. For most small to medium-sized businesses, it arises when a customer invoice cannot be collected after payment chasing, formal demands, and statements have produced no result. Recording a write-off keeps your accounts accurate and allows you to claim potential tax relief on the lost income - provided you have the documentation to support the decision.

When a Write-Off Is Appropriate

Not every overdue invoice needs to be written off. Some customers pay late, others need persistent chasing, and some disputes can still be resolved. A write-off becomes appropriate when a customer has become insolvent or entered liquidation, when a debt has been outstanding for long enough that further recovery action is not commercially viable, or when a formal bad debt judgment has been obtained and the debtor cannot pay.

Before writing off a debt, you should have a documented record of your collection efforts: a copy of the original invoice, payment reminders, account statements, and any formal correspondence. HMRC requires evidence that a debt was genuinely irrecoverable before permitting a tax deduction, so a clear paper trail matters beyond good practice alone.

Write-Off vs. Bad Debt Provision

A write-off and a bad debt provision are different tools for handling the same underlying risk. A provision - sometimes called an allowance for doubtful accounts - estimates the portion of outstanding receivables that may not be collected, and sits as a contra-asset on the balance sheet. This approach follows the accrual principle by matching expected losses to the period in which the corresponding income was recognised.

A direct write-off, by contrast, removes a specific confirmed debt from the books once it is certain to be unrecoverable. Smaller UK businesses using cash-basis accounting often take the direct write-off approach, while businesses following FRS 102 standards typically maintain a provision and write off individual debts against it as they are confirmed irrecoverable. If you are VAT-registered, a write-off on an invoice more than six months overdue may also entitle you to reclaim the VAT through HMRC's Bad Debt Relief scheme.

Where a customer later pays a debt that has already been written off, the receipt is recorded as income in the period it arrives - the write-off does not prevent collection; it simply removes the amount from outstanding receivables for reporting purposes.

When an invoice is written off, the change should be reflected promptly in your accounting system. Zigaflow's Xero and QuickBooks integrations keep invoice records synchronized, so the write-off recorded in your accounting software matches the status in your billing system without manual duplication.