Bad debt is not simply an old invoice
A missed due date signals delinquency, not automatic uncollectibility. There is no universal rule that every invoice becomes bad debt at 90 days.
Relevant evidence can include payment history, financial distress, insolvency, disputes, and the quality of supporting records. A billing error or unapplied receipt should be investigated rather than treated as a credit loss by default.
Allowance versus write-off
An allowance reflects estimated credit losses under the applicable accounting framework. A write-off removes an amount from the recorded receivable according to approved policy.
Where a loss allowance already covers the amount, the write-off may use that allowance rather than create the same expense again. The accounting team should determine the entries.
Example: gross receivables of $10,000 less a $600 loss allowance produce $9,400 of net receivables in this simplified illustration. That allowance does not mean a specific customer has paid or had a debt forgiven.
Accounting and legal status differ
A write-off does not, by itself, establish that the customer's legal obligation has been canceled. Record settlement, bankruptcy, collection restrictions, and accounting adjustments separately.
Tax treatment needs its own review
U.S. tax deductions have separate requirements. Cash-method taxpayers generally cannot deduct unpaid fees that were never included in income. See the IRS bad-debt deduction guidance.
Track loss estimates, approved write-offs, later recoveries, and credits separately from cash collections.
Related terms: Aging Buckets and Balance Sheet.