When to Write Off and When to Collect
This video explains how to choose between pursuing an overdue business debt and writing it off. It compares the financial outcomes, examines debtor solvency, disputes and enforcement, and shows why a timely decision matters.
Key takeaways
- Compare the net proceeds of collection with the tax benefit of a write-off rather than treating them as equivalent outcomes.
- Check the debtor’s solvency, the substance of any dispute and the practical prospects of enforcement.
- Act promptly: shifting assets, corporate restructuring and deteriorating records can make older debts harder to recover.
- Consider a write-off when dissolution, limitation deadlines or disproportionate recovery costs make pursuit uneconomic.
- Avoid leaving overdue balances unresolved without an assigned course of action.
What this video covers
The video presents debt recovery and write-offs as choices that require an explicit commercial assessment. Its financial example compares a €100,000 receivable written off at a 25% corporate tax rate with collection at a 15% contingency fee. The resulting €25,000 tax saving is contrasted with €85,000 in net recovery proceeds—a €60,000 gap. It then sets out three checks: whether the debtor remains solvent, whether the claim faces a genuine dispute, and whether enforcement is practical in the relevant jurisdiction. A solvent debtor with an undisputed obligation and an enforceable claim points toward collection. Insolvency may call for formal proceedings, while substantive contractual disagreements may require legal resolution. Timing also affects the decision. As a debt ages, assets may move, businesses may restructure and supporting records may become more difficult to assemble. Waiting can therefore weaken recovery prospects rather than preserve the available options. The video also identifies circumstances where writing off a balance makes commercial sense, including dissolution without a successor, expired limitation periods, inaccessible courts and small claims in complex jurisdictions. Its central lesson is to assess the case, select a route and follow through, rather than allow an overdue receivable to remain unattended.
