Bad Debt Write-Off Memo
The paper trail that lets you write off a debt and defend it later.
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| Customer | [customer] |
| Amount to write off | $ [amount] |
| Date | October 14, 2026 |
1. Invoices concerned
| Invoice | Date | Amount |
|---|---|---|
| [add one invoice per line] |
2. Recovery action taken
[add one step per line — dates matter here]
3. Conclusion
The debt is considered irrecoverable. It is written off to the profit and loss account in the current period. Any tax relief and any adjustment to sales tax already accounted for will be claimed in accordance with the rules in force.
Writing the debt off does not release the customer from the obligation. If circumstances change, recovery may still be pursued and any amount received will be credited in the period it is received.
What is a Bad Debt Write-Off Memo?
A bad debt write-off memo is the internal record stating that a specific invoice is no longer collectable, why, what evidence supports it and who approved it. The write-off itself is a two-line journal entry anyone can post. The memo is what defends it later, when an auditor, a lender or a tax officer asks why revenue you once reported has quietly disappeared from the books.
Finance managers, credit controllers and owner-managers write these at year end and whenever a specific debt fails. The usual triggers are an insolvent customer, one who has stopped responding and cannot be traced, a balance too small to be worth recovering, a debt settled for part of its value, and a debt old enough that pursuing it is no longer realistic. Larger organisations run a periodic review, so a batch is assessed together under one approval covering the attached schedule.
How the write-off interacts with tax varies. Some systems require the debt to be written off in the accounts before any deduction is claimed, some allow only specific charge-offs rather than general provisions, and relief for the sales tax element is a separate mechanism again — VAT bad debt relief in the UK, GST adjustments in India and Australia, state-level rules in the US. Each sets its own conditions on the age of the debt and the records you keep. Take the treatment to your accountant.
Writing a debt off does not cancel it. The customer still owes the money, you can still pursue it, and if they pay next year you recognise a recovery rather than pretending it never happened. The memo is an accounting judgement about collectability, not a legal release, and it is not a settlement agreement — accepting less in full and final settlement is a different document with different consequences. It also does not replace a credit note where the invoice was simply wrong.
What to put in a Bad Debt Write-Off Memo
These are the details this template asks for. Anything left blank is marked in red on the preview so you can see what is still missing.
| Field | What goes in it |
|---|---|
| Business name | For example: Barton Supply Co. |
| Your address | For example: Unit 7, Barton Road, Columbus, OH 43212 |
| Customer | For example: Sandusky Builders Inc. |
| Amount to write off | For example: 1,84,600 |
| Invoices concerned | One per line: Invoice | Date | Amount |
| What was done to recover it | One per line |
| Write-off approved by | For example: James Whitfield, Managing Director |
How to write a Bad Debt Write-Off Memo
Identify the debt precisely
Name the customer, the account reference, each invoice number, its date, the original amount and the balance outstanding. If you are writing off part of a balance, say which invoices it relates to. A memo reading write off the Henderson account for £3,400 is worth nothing in two years, when the ledger has moved on and nobody can reconstruct which invoices it covered.
Record what recovery was attempted
List the steps and their dates: statements, reminders, calls, a final demand, a solicitor's letter, a claim filed, a proof of debt lodged with an administrator. Attach the returned mail, the insolvency notice or the trace report. The strength of the memo is here — a write-off with a documented recovery history is a business judgement, and one without it looks like housekeeping.
State the reason under a named category
Use a short defined reason rather than a narrative: customer insolvent, customer untraceable, uneconomic to pursue, statute-barred, settled short, goods disputed and conceded. A named category makes the year's write-offs analysable and shows a pattern. If half of them read uneconomic to pursue, the real problem is your credit terms, not your collections.
Set out the amounts and the treatment
Show the gross balance, any sales tax element and the net amount being removed, with the accounts being debited and credited and the period the entry falls in. If the debt was already covered by a provision for doubtful debts, say so, because the entry releases the provision rather than hitting profit again. Have your accountant confirm the treatment before posting.
Get it approved and file the evidence
Have it signed by someone who did not raise the invoice and did not post the journal, with their name, role and date, and note the approval limit it falls under. Keep the memo and its attachments for at least your local retention period, filed against the customer account, so anyone reviewing the ledger finds the reasoning without asking you.
Common mistakes
- Issuing a credit note instead of writing the debt off reverses the original sale, which misstates revenue and can adjust sales tax you were never entitled to adjust that way.
- Deleting or voiding the original invoice destroys the audit trail, so the write-off cannot be traced, comparatives stop agreeing, and any later recovery has nothing to attach to.
- Writing off a balance while a payment plan is still being honoured hands the customer an argument that the debt was abandoned, and stops anyone chasing the instalments.
- Recording only the amount and not the recovery attempts leaves a deduction you cannot support, which is exactly the item an auditor or tax reviewer pulls first.
- Assuming the sales tax element follows the debt automatically means either claiming relief you do not qualify for or missing relief you did, both of which surface as an adjustment later.
Frequently asked questions
What is the difference between a bad debt write-off and a credit note?
A credit note cancels or reduces an invoice because something about the sale was wrong — wrong price, short delivery, goods returned. A write-off says the sale was correct and the customer is not going to pay. They land differently: a credit note reduces revenue, a write-off becomes an expense. Using a credit note to clear a valid unpaid invoice misstates both.
Can I still chase a debt after writing it off?
Yes. A write-off is an accounting decision about whether you expect to collect, not a legal decision to forgive. The obligation survives unless you have released it in writing or the local limitation period has expired. If the customer pays afterwards, the receipt is recorded as a bad debt recovered rather than posted against the original invoice.
What evidence do I need to support a write-off?
Whatever shows you tried and formed a reasonable view: copies of the invoices, the statements and reminders sent, notes of calls, any formal demand, and third-party evidence such as an insolvency notice, returned letter or failed trace. Requirements differ by jurisdiction, so confirm what your revenue authority expects before relying on the file.
Do I write off the VAT or GST as well?
That is handled separately from the accounting write-off. Most systems give relief on the tax element only through their own mechanism, with conditions on how old the debt must be, how it is recorded and what happens if the customer later pays. Rules differ between the UK, EU states, India, Australia, Canada and the US — check the current conditions.
When should a debt be written off?
When there is a specific reason to believe it will not be collected, not simply because it aged past a column on a report. Insolvency, a failed trace, or a considered decision that recovery costs more than the debt are all defensible. Age alone is not, and writing off on a schedule rather than on evidence is the pattern reviewers look for.
This page explains general practice and is not legal advice. Requirements differ between countries and, in some cases, between states — check what applies where the document will be used.