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Write off an uncollectable debt

money.write-off-bad-debt·version 1.0.0·draft3 to verify

Write off an uncollectable debt

The receivable is written off in the books with a documented basis, the VAT and tax consequences are handled, and the customer is closed cleanly.

InetaCredit Controllerruns itProfile ›
Whenon request — owner or bookkeeper decides an overdue receivable is likely uncollectable
Who actsthe agent acts after approval
Time45 min active; up to 1 month waiting for the debtor's insolvency or liquidation evidence
CountryLatvia
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When to use

An invoice has been chased and cannot be collected. Not for a debt still in normal collection — use money.chase-overdue-invoice first; a write-off comes only after chasing has failed. Not for a disputed invoice where the customer claims the goods or service was not delivered — resolve the dispute first; writing off a disputed invoice books a loss that was never a debt. Not for the company's own unpaid bills — that is money.process-incoming-invoice and money.tax-debt-check territory.

Before you start

  • The month-close status is known: the write-off lands in a specific period, so check where the current close stands.
  • The chase history is in hand: dates of reminders, the last reply, the current invoice balance (principal, VAT, late interest).
  • The owner has said this debt is a candidate; the agent does not propose write-offs on its own initiative.

What a run requires2

  • Approval · S4 · ownerthe run stops until a named person records the decision
  • Approval · S6 · ownerthe run stops until a named person records the decision

Any step can wait until a date and reopens by itself; every closed step leaves evidence (a note, a link, a number).

The trail9 steps

  1. Assemble the debt fileagent

    Pull the invoice(s), the delivery confirmation, the reminder history and the current balance from the ledger.

    Done when one file shows: who owes, how much, since when, what was done to collect.

  2. Establish the debtor's statusagent

    Check the company register (ur.gov.lv) for the debtor: active, insolvency proceedings, liquidation, struck off. Record what was found with the date. ⚠ verify what register evidence Vidzeme/VID accepts as proof of uncollectability — check vid.gov.lv guidance before relying on it.

    Done when the debtor's status is a dated fact in the file, or "still active, unreachable" is recorded with the chase evidence.

  3. Calculate the write-off and the tax effectagent

    Compute the amount to write off (principal + late interest as agreed; VAT handled separately) and prepare the bookings. ⚠ verify the VAT bad-debt correction conditions and period — Likums "Par nodokli no pievienotās vērtības", and whether the debt meets them (e.g. overdue beyond the statutory threshold, debtor's status).

    Done when a one-page calculation shows the ledger amount, the VAT correction amount and the period it lands in.

  4. Decideownerneeds approval · owner

    Approval · S4 · owner — the run stops until a named person records the decision

    Present the file, the calculation and the alternative (keep chasing, sell the debt, court claim). The owner decides: write off fully, write off partially, or not yet.

    Done when the owner has named the decision and the amount, in writing or recorded in the decision log.

  5. Book the write-offagent

    Post the write-off to the ledger in the agreed period, with the decision and the file attached to the entry. If the VAT correction applies, record it so it appears in the next VAT return (money.vat-return-lv picks it up).

    Done when the receivable balance for this customer shows the write-off and the supporting documents are linked to the entry.

  6. Confirm the VAT return lineownerneeds approval · owner

    Approval · S6 · owner — the run stops until a named person records the decision

    Before the return is filed, the owner approves the corrected figures — a wrong correction is a penalty plus interest, not a rounding error.

    Done when the owner has approved the VAT figures for the period containing the correction.

  7. Close the collection workagent

    Mark the invoices as written off in the customer record, stop any active chase tasks, and note in the record: "written off on <date>, decision ref <x> — resume only if the debtor pays or reappears."

    Done when no open task or reminder exists for this debt.

  8. Watch for repaymentagent

    Set a standing check: if money ever arrives from this customer, it must be matched against the written-off invoices and booked per the decision in S4 (usually as recovered income in the period received).

    Done when a task or watch exists that will catch an incoming payment from this debtor.

  9. Record and hand backagent

    File the decision, the evidence and the calculation in the documents module under the customer. Send the owner a three-line summary: what was written off, the tax effect, what happens if the debtor pays later.

    Done when the decision, evidence and calculation are filed under the customer in the documents module, and the owner has the three-line summary.

Checks — how we know it worked

  • The written-off amount in the ledger equals the calculation in S3 (read both back, digit by digit).
  • Every invoice in the write-off exists, is unpaid at the stated balance, and belongs to this customer.
  • The decision (who, when, amount) is recorded and linked to the ledger entry.
  • If a VAT correction applies: it is in the draft of the correct period's return, and the owner approved it (S6).
  • No open chase task remains for the debt.

If it goes wrong

SymptomResponse
Debtor pays after the write-offDo not book it as unrelated income; match it to the written-off invoices and book as recovery per the S4 decision.
No chase history existsStop — go back to money.chase-overdue-invoice and run it; a write-off with no chase evidence will not survive an audit.
Debtor disputes the debt at write-off timeIt is not a bad debt; move to a dispute resolution path and keep the receivable on the books until resolved.
VAT correction was missed in the right periodCorrect in the next return with the reason stated; ⚠ verify penalty interest calculation rules on vid.gov.lv before filing.
Owner wants to write off to improve the month's numbersRefuse the timing motive; write-off follows the evidence (S2), not the reporting calendar — record the refusal.

What each step leaves behind

  1. S1one file shows: who owes, how much, since when, what was done to collect.
  2. S2the debtor's status is a dated fact in the file, or "still active, unreachable" is recorded with the chase evidence.
  3. S3a one-page calculation shows the ledger amount, the VAT correction amount and the period it lands in.
  4. S4the owner has named the decision and the amount, in writing or recorded in the decision log.
  5. S5the receivable balance for this customer shows the write-off and the supporting documents are linked to the entry.
  6. S6the owner has approved the VAT figures for the period containing the correction.
  7. S7no open task or reminder exists for this debt.
  8. S8a task or watch exists that will catch an incoming payment from this debtor.
  9. S9the decision, evidence and calculation are filed under the customer in the documents module, and the owner has the three-line summary.

Evidence to keep

The debt file (invoices, chase history, delivery proof) · the register check with date · the calculation page · the owner's decision with date · the ledger entry reference · the VAT return line, if any · the S8 watch task id.

How this playbook improves

After every 10 runs ask: how long from ask to booked write-off, and which step waited longest (usually S2)? Did any written-off debt get collected later, and was the recovery booked cleanly? Did any VAT correction draw a question from VID? A new version changes the step that caused the wait or the miss, and says so in its change note.