Bad Debt & Invoice Write-Off Risk Calculator
Enter your outstanding AR by age bucket and calculate your expected bad debt using industry write-off rates. See which invoices need immediate action before they become unrecoverable. Free, no account needed.
Industry Write-Off Rates by AR Age
These rates represent industry averages for B2B invoices. The older an invoice, the lower the probability of collection.
| AR Age Bucket | Write-off Rate |
|---|---|
| Current (not yet overdue) | 0.5% |
| 1–30 days overdue | 4% |
| 31–60 days overdue | 10% |
| 61–90 days overdue | 22% |
| 90+ days overdue | 50% |
What to Do at Each Stage
Friendly email reminder. Assume oversight. One message typically resolves it.
Neutral to firm follow-up. Request specific payment date. Add phone call if email ignored.
Firm notice with late fee statement. Set a hard deadline. State consequences clearly.
Final notice + Letter Before Action. Consider debt collection agency or small claims court.
Generate the right email for each stage with the payment reminder email generator.
Frequently Asked Questions
What is a bad debt reserve?+
A bad debt reserve (also called an allowance for doubtful accounts) is the amount of your outstanding AR that you estimate will never be collected. It is calculated by applying industry write-off rates to each age bracket of your AR: current (not yet overdue), 1–30 days, 31–60 days, 61–90 days, and 90+ days. The older the invoice, the higher the write-off rate.
What percentage of invoices go unpaid?+
Industry averages: approximately 0.5% of current (not yet overdue) AR is typically written off. For invoices 1–30 days overdue: about 4%. At 31–60 days: about 10%. At 61–90 days: about 22%. At 90+ days: approximately 50%. These rates vary by industry and client type — construction and professional services tend to have higher write-off rates than retail.
How do I calculate my bad debt expense?+
Apply write-off rates to each AR age bucket: (Current AR × 0.5%) + (1–30 day AR × 4%) + (31–60 day AR × 10%) + (61–90 day AR × 22%) + (90+ day AR × 50%). Sum these to get your total expected bad debt expense. This is the amount you should reserve (and potentially write off for tax purposes at year-end if invoices remain uncollected).
Can I write off bad debt for tax purposes?+
Yes, in most jurisdictions. In the UK, bad debts can be written off as a business expense once you have made reasonable efforts to collect and the debt is clearly irrecoverable (typically 6+ months overdue with documented chase attempts). In the US, you can deduct bad debts if you use accrual accounting. If you use cash accounting, the deduction is not available — you never recognised the income. Always consult an accountant for your specific situation.
When should I write off an invoice as bad debt?+
Write off when: (1) the invoice is 6+ months overdue with no payment plan agreed; (2) you have exhausted all reasonable collection attempts (emails, phone calls, formal demand letter); (3) the client is insolvent, dissolved, or untraceable. Writing off does not mean giving up — you can still pursue legal action after writing off for accounting purposes. Document every collection attempt before writing off, as this record is required for tax purposes.
What should I do with 90+ day invoices immediately?+
Act urgently: (1) send a formal final notice letter (not just email) stating you will proceed to legal action or collections if not paid within 7 days; (2) consider using a debt collection agency (typically 15–40% fee but zero effort from you); (3) if the amount justifies it, file a small claims court claim — this is often the most effective motivator for payment. The 50% write-off rate at 90+ days means half of these invoices will be lost if not actively escalated now.
Bad Debt: How to Prevent It, Quantify It, and Write It Off
Bad debt is revenue you have earned but will never collect. For most small businesses, the annual bad debt expense is 1–4% of total invoiced revenue. That sounds small — but for a business invoicing £200,000 per year, that is £2,000–£8,000 in lost revenue every year. The calculator above shows your current exposure; here is how to reduce it.
The Compounding Effect: Why Age Kills Collectibility
An invoice at 30 days overdue is annoying. The same invoice at 90 days is a business problem. The write-off rate roughly doubles with each 30-day period — from 4% at 30 days to 10% at 60 days to 22% at 90 days to 50% at 120+ days. The reason is behavioural: a client who has not paid for 90 days has usually made a decision — conscious or not — to defer this debt indefinitely. Recovery requires escalation that many small business owners are reluctant to pursue.
The implication: it is dramatically more effective to chase an invoice at day 7 than at day 60. An overdue invoice at 7 days is almost always an administrative oversight. At 60 days, it is a managed deferral. The intervention required and the cost of recovery are completely different. This is why systematic, early follow-up is the single most important tool for reducing bad debt.
When to Use a Debt Collection Agency
Debt collection agencies charge 15–40% of the amount recovered — typically on a no-win, no-fee basis. This is expensive but often the right choice when: the invoice is 90+ days overdue and has not responded to formal demands; the amount is too small to justify legal fees (under £1,000–£5,000 depending on jurisdiction); you do not want to manage the collection process yourself; or the client is unresponsive.
Before engaging a collection agency, always send a formal Letter Before Action (LBA) or Final Notice — many clients pay at this stage to avoid the formal process. For template language, see the overdue invoice letter templates and final notice invoice email templates.
Preventing Bad Debt Before It Happens
The most effective bad debt prevention is upfront: vet new clients (Companies House / credit checks for large B2B contracts), require deposits for new or high-risk clients, include a late fee clause in your contracts, use short payment terms (Net 14 vs Net 30), and maintain a consistent follow-up system that catches invoices at 7 days — not 60. For the full prevention guide, see how to avoid late payments and for what happens when a client refuses to pay, see client refuses to pay invoice.
Every week you wait, recovery odds drop. Chase starts at day 1.
The write-off risk you just calculated is the cost of letting invoices drift past 30, 60, 90 days without a structured chase. InvoiceGrid flags overdue invoices the moment they miss due date — and escalates the chase automatically so nothing falls through.
- ✓Automatic overdue flagging from day 1 — before invoices become uncollectable
- ✓Chase log per invoice that builds your evidence trail if you need to escalate legally
- ✓Catch and chase 90-day invoices before they become write-offs
Also useful: AR aging report · DSO calculator · Payment reminder generator · Client refuses to pay · Small claims court guide