At some point the cost of chasing exceeds what you would recover, and it is time to write off bad debt. Recognising that moment is a commercial decision, and delaying it is expensive in a way that does not show up anywhere.
The arithmetic before you write off bad debt
A R4,000 debt chased for six months at two hours a month, on a business charging R450 an hour, has consumed R5,400 of capacity. You are now losing money by continuing, and the odds of recovery fall the longer it runs.
Set a threshold in advance. Below a certain amount and beyond a certain age, you write it off rather than deciding case by case while annoyed.
Before you write off
- Confirm the invoice was correct and properly delivered. A debt you never invoiced properly is not a bad debt.
- Confirm it was sent to the right person, with any PO number required.
- Make one final written demand with a deadline.
- Get a decision on whether to hand it to a collections agent. They typically work on a percentage, so something is better than the nothing you are about to accept.
What writing off means
You remove the debt from what you expect to receive, and you recognise the loss. Practically:
- The invoice is not deleted. It was validly issued and forms part of your records.
- The write-off is recorded as a separate transaction, so the history stays visible.
- Where you accounted for VAT on that invoice, bad debt relief may be available. There are conditions and time limits.
- The client should be flagged so nobody quotes them again without terms.
The client relationship
A written-off debt does not have to end in acrimony, and sometimes the client resurfaces years later able to pay. What should end is unsecured credit. If they come back, quote them on full payment up front, and say so plainly rather than pretending nothing happened.
Preventing the next one
| Signal at the time | What to do next time |
|---|---|
| New client, large first job | Deposit, or stage the work |
| Pushed back on any deposit | Treat as information |
| Slow on the first small invoice | Do not extend more credit |
| Went quiet once work started | Stop at the next milestone, in writing |
Common questions
Can I claim the VAT back?
Bad debt relief may be available in specified circumstances, with conditions and time limits. Confirm your position before adjusting a return.
Should I use a collections agent?
For amounts worth the fee, often yes. They typically take a percentage of what they recover.
Does writing off stop me pursuing it later?
It is an accounting recognition, not a waiver. Prescription is a separate question with its own time limit.
Clear terms and a visible due date on every invoice make this rarer.
Start invoicingDisclaimer: This content is for general information only and does not constitute legal, tax, accounting or financial advice. Always confirm important requirements with SARS, the relevant authority or a qualified professional.
