Invoice Write-Off Calculator
Should you keep chasing or write it off? Enter the invoice amount, days overdue, hours spent chasing, and client relationship — get a data-driven recommendation on whether to continue pursuing, escalate to a collection agency, or write off as a bad debt.
When to Chase vs. When to Write Off
The decision to continue chasing an invoice is fundamentally an ROI calculation: does the expected recovery exceed the cost of continued pursuit? A write-off is an accounting action that removes the uncollectable amount from your books — the challenge is that most businesses pursue based on emotion (the principle of being paid what they are owed) rather than economics.
Keep chasing when...
- Invoice is under 90 days overdue (73%+ recovery probability)
- Expected recovery value is significantly higher than your chase cost
- You have a signed contract and clear evidence of delivery
- The client is still trading and responsive (even if delaying)
- A formal demand letter has not yet been sent
Consider writing off when...
- Invoice is 6+ months overdue (under 42% recovery probability)
- Client is insolvent, dissolved, or unreachable
- Chase cost approaches or exceeds expected recovery
- Invoice is too small to justify small claims filing fee
- Continued pursuit is damaging other client relationships
Tax Implications of Writing Off a Bad Debt
Before writing off, understand the tax position in your jurisdiction — a bad debt write-off may reduce your tax bill.
US (accrual basis)
You can deduct specific bad debts that you previously included in income and have taken reasonable steps to collect. Cash-basis businesses cannot deduct unpaid invoices (income was never recognised). Document your collection attempts.
UK
For Corporation Tax, specific bad debts are deductible when the debt is genuinely irrecoverable. For VAT: claim bad debt relief after 6 months unpaid — reclaim the VAT you already paid on the invoice. File VAT 652 (or through your VAT return).
Australia
Bad debts are deductible for income tax when written off in your accounts and you have taken steps to recover. For GST: if you are on accruals basis and the debt is written off, you can claim a GST credit adjustment.
Always consult your accountant before writing off a bad debt — the rules are jurisdiction-specific and the deduction requires proper documentation.
Frequently Asked Questions
When should I write off an unpaid invoice?+
Consider writing off when: collection probability is below 30% (typically 6+ months overdue), your chase cost is approaching or exceeding the expected recovery value, the client is insolvent or has disappeared, or the invoice is below the small claims court threshold in your jurisdiction and you do not want to pursue court. Writing off does not mean you stop trying entirely — you can still pursue informally — but you accept the financial reality for accounting purposes.
Is a written-off bad debt tax deductible?+
In most jurisdictions, yes — but the rules differ. In the US, businesses on accrual accounting can deduct bad debts when they become uncollectible (you must have previously recognised the income). Cash-basis businesses cannot deduct unpaid invoices because the income was never recorded. In the UK, bad debt relief allows VAT-registered businesses to reclaim the VAT on written-off invoices (over 6 months unpaid). Always consult your accountant for your specific situation.
How is collection probability calculated in this tool?+
The probability estimates are based on industry AR recovery data showing the steep decline in collectability over time: approximately 95% within 30 days, 73% at 90 days, 42% at 6 months, and 13% at 12 months. The client relationship factor adjusts this — key accounts are worth more effort and have slightly higher recovery rates due to relationship leverage. These are estimates, not guarantees; actual results vary by industry, client type, and collection effort.
What is a collection agency and when should I use one?+
A collection agency is a third party that pursues debts on your behalf, typically for a commission of 25–35% of the recovered amount (contingency fee). Use one when the invoice is large enough to justify the commission, your own chase efforts have failed over 90+ days, you do not want to pursue small claims court, and you want to preserve some recovery without investing more of your own time. Never use one for key client relationships you want to preserve — it will end the relationship.
How do I write off a bad debt in my accounts?+
The basic accounting process: (1) Identify the specific invoice as uncollectible — document your evidence. (2) Debit 'Bad Debt Expense' and credit 'Accounts Receivable' for the invoice amount. (3) If VAT/GST was charged, reclaim it (UK/Australia) or adjust as required. (4) Keep the documentation — you may need it for a tax deduction or if the client later pays. Some businesses use an 'Allowance for Doubtful Accounts' to provide for bad debts before they are confirmed uncollectible — this smooths the P&L impact.
Chase Smarter. Write Off Less.
The best way to avoid write-offs is to chase consistently from day one — before collection probability falls. InvoiceGrid ensures every invoice is followed up on schedule, so invoices never become bad debts through neglect.
Also useful: Bad debt calculator · Bad debt write-off guide · Client not paid after 60 days · Payment reminder generator