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Accounts Payable & Receivable › Collections & Bad Debts

How do you decide when to write off versus continue pursuing a debt?

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Answer

Weigh expected recovery against the cost and time of further pursuit, the age and evidence of uncollectibility (insolvency, no contact, failed legal action), and materiality. When further effort costs more than likely recovery, or the debtor is clearly insolvent, write off (with approval) while retaining the right to collect if circumstances change.
Real-world example After a debtor's liquidation with no distribution expected, the balance is written off rather than spending more on recovery.

Common follow-ups: What evidence supports a write-off? | Who approves write-offs?