When should I write off an unpaid customer invoice?

Review the invoice age, payment promises, correspondence and any known financial difficulties. A customer entering insolvency may provide stronger evidence than one simply missing a payment date, although some recovery could still be expected. If only part of the balance is recoverable, the accounting treatment may need to reflect that rather than writing off everything. Separate genuine bad debts from disputed prices, cancelled work and invoices raised in error. Those can require different corrections. Keep a short explanation of the amount, the evidence and who approved the decision. A realistic debtor balance helps you understand the business position without allowing old invoices to overstate the cash you are likely to receive.

Use the appropriate bad debt or impairment process in your accounting system and retain the original invoice and collection trail. Do not issue a credit note simply to make an unpaid balance disappear if the supply and agreed price remain valid. A credit note changes the sales record and may change VAT, so it must reflect the actual circumstances. An accounting write-off does not itself cancel the customer’s legal obligation, and a later recovery needs recording. CASS can help you distinguish write-offs from invoice corrections, keep the debtor report useful and check any separate tax or VAT claim. It is also a good point to review credit limits and payment terms.