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Write Off an Invoice That Will Never Be Paid

In Short

Section titled “In Short”

An invoice is marked Uncollectible only once it has reached the Problem status. A write-off is neither a cancellation nor a credit note: the invoice is not offset, and its amount, genuinely due, is recorded as lost. An invoice that is still due, and has not yet gone wrong, cannot be written off however certain the loss is.

How It Works

Section titled “How It Works”

Three accounting outcomes are often confused, and they are not interchangeable:

Outcome What it says When it applies
Void The invoice is offset, so the customer owes nothing An error, caught before or after issue, or a deliberate waiver of the whole invoice as a goodwill gesture
Credit note A credit is granted to the customer A goodwill gesture, a correction, a partial refund
Uncollectible The amount was due and will not be collected A customer in liquidation, an unrecoverable debt

An invoice written off stays in the accounts: the invoice, its number and its amount are all kept. The receivable is recorded as lost, which is what an accountant needs, where a cancellation offsets the invoice without recording a loss.

Only the Problem status opens the write-off, and an invoice reaches it in three ways, visible in its technical state:

  • Automated payment failure (ProblemAuto) — an automatic payment failed. This happens on its own, within days.
  • Overdue (ProblemOverdue) — an offline invoice passed its payment deadline. The deadline is the payment limit counted from the issue date (30 days by default), plus the tolerated grace period (10 days by default), so an offline invoice goes overdue about six weeks after issue with the standard settings.
  • Disputed (ProblemDisputed) — a dispute was registered on the invoice. Registering a dispute is available on a Paid invoice only, which is the chargeback case, not the unpaid one.

An unpaid offline invoice can therefore be written off only once it is in the Overdue state. That is the only route open to it: with no automatic payment, it cannot reach the Automated payment failure state, and since it is not Paid, no dispute can be registered on it.

Steps

Section titled “Steps”
  1. Open Invoicing and select the invoice.
  2. Check that its status is Problem.
  3. Open Actions → Uncollectible.
  4. Confirm.

See Also

Section titled “See Also”