Bad Debt Write-Off Approval Checklist

Before you start

A write-off recognises that a debt is unlikely to be recovered, but it should follow real effort and a clear decision, not convenience. Before approving one, gather the account history, the chasing record, and any reason the debt has become uncollectable, and check whether any recovery avenue remains.

• Pull the full account and payment history for the debt.
• Confirm what chasing and recovery steps have already been taken.
• Identify why the debt is considered uncollectable now.
• Check whether any security, guarantee or recovery option remains.

This is general information only and not legal advice, and not tax advice. The accounting and tax treatment of a write-off matters — confirm it with your accountant or adviser.

Confirm recovery is exhausted

1. Review the reminders, demands and calls already made.
2. Check whether a commission-only recovery partner could still pursue it.
3. Confirm the debtor is genuinely unable to pay, not just slow or disputing.
4. Consider whether any director's guarantee or security could be enforced.
5. Decide whether write-off is the right call or whether one more step is worthwhile.

Writing off too early forfeits money you could have recovered. Because recovery often costs nothing upfront on a commission basis, it is usually worth confirming there is truly nothing left to chase before you write the debt away.

Approve and record

1. Apply your approval policy and authority limits to the write-off.
2. Document the reason and the recovery history supporting the decision.
3. Record the write-off in your ledger correctly, with the date and amount.
4. Discuss the tax and GST treatment with your accountant before finalising.
5. Flag the debt so it can be revived if the debtor's circumstances change.

A documented approval protects you from later questions about why the debt was written off. Keeping a note of the debt rather than deleting it entirely lets you reopen recovery if the debtor reappears or recovers financially.

Common mistakes

• Writing off a debt simply to tidy the ledger before recovery is exhausted.
• Skipping the approval step or ignoring authority limits.
• Getting the accounting or GST treatment wrong without checking.
• Deleting the debt entirely, losing the ability to pursue it later.
• Overlooking a guarantee or security that could still be enforced.

Before writing off anything substantial, a free debt appraisal can confirm whether the debt is genuinely beyond recovery.