What's your go-to method when you have to write off an unpaid invoice?

Debt Collection & Unpaid Invoices
1

Dealing with an unpaid invoice is exhausting. I’ve reached out multiple times and it feels like I’m just wasting my energy.

It’s not a large amount, but it’s still something I worked hard for. At what point do you decide it’s better to write it off and just let it go?

2

I have a rule now - if it’s under $500 and I’ve already sent two follow ups, I write it off after 60 days total.

Learned this the hard way when I spent weeks going back and forth over a $200 invoice. My accountant told me to track the hours I was spending on collection. Turned out I wasted 8 hours on something that would have taken me 4 hours to earn fresh.

Now I just add those write offs to my taxes as bad debt and factor a small percentage into my pricing. Much better for my sanity.

3

Here’s what I do when deciding whether to write off an invoice:

  • Calculate my hourly rate for chasing vs earning - If I’m spending more time collecting than I would earning new money, it’s done
  • Set a hard deadline - Usually 90 days from original due date, no exceptions
  • Consider the client relationship - Sometimes burning bridges costs more than the invoice amount

The mental energy drain is real though. I started keeping a simple spreadsheet of collection time because I was fooling myself about how much effort I was putting in.

One thing that helped me was treating write offs as a business expense from day one. I budget for about 2-3% of my annual income to go unpaid. Makes it easier to let go when you’ve already mentally accounted for it.

Also learned to trust my gut early. If someone seems sketchy during the project, they probably won’t pay easily either.

4

Small amounts aren’t worth the stress. I just write them off and move on.

5

I look at how much time I’ve already spent on it compared to the invoice amount. If I’ve already spent more hours chasing than what I could earn on new work, I write it off.

Keep the client on a blacklist though. Not worth dealing with them again even if they come back later.

6

I usually give up after three tries then move on.

7

Send a final demand letter and give them a 10-day deadline. If there is still no payment, it is time to write it off. Keep your records detailed for tax purposes since you can deduct bad debt. Remember, the time you spend chasing small amounts often costs more than the invoice itself. Use this as a lesson and consider asking for payment upfront next time.