You've chased them three times. Maybe four.
The invoice is 60 days overdue. Maybe 90.
Now you're staring at a decision: keep fighting or let it go.
Neither option feels good.
Chase it and you're throwing good time after bad money. Write it off and you've just worked for free.
So which is it?
The Write-Off Trap
Most businesses write off debt too early.
Not because they're generous. Because they're exhausted.
Chasing payment is miserable. It's awkward. It's time-consuming. It feels like begging for money you've already earned.
So you tell yourself stories:
"It's only $800. Not worth the hassle."
"I'll just focus on new clients instead."
"The stress isn't worth it."
Then you write it off. Claim the tax deduction. Move on.
Except you don't move on.
Because next month, another client goes late. And the month after that, another one.
Each time, you write it off a bit faster. The threshold creeps up. First it was $500. Then $1,000. Now you're writing off $2,000 invoices because "it's not worth the fight".
You're not moving on. You're training clients that you don't enforce payment.
The Fight-Too-Long Trap
Then there's the opposite mistake.
You spend six months chasing a $1,200 debt. Emails. Calls. Registered letters. Legal threats.
You finally recover $800 after the debt collector takes their cut.
Congratulations. You just earned $133 per month for half a year of stress.
Could've made more delivering Uber Eats.
Fighting every debt to the death isn't noble. It's math ignorance.
The Framework: Four Questions
Before you write off or escalate, answer these four questions honestly.
Question 1: What's Your Real Cost To Recover?
Not the debt collector's fee. Your cost.
Calculate:
• Hours you'll spend managing the recovery (yours and your team's)
• Your actual hourly rate (revenue divided by hours worked)
• Emotional bandwidth (stress tax is real)
Example:
$2,000 debt
5 hours of your time at $150/hour = $750
Debt collector fee: 25% = $500
Real recovery: $2,000 - $750 - $500 = $750
You're working to recover 37.5% of the invoice. Is that worth it?
Rule:
If recovery nets you less than 50% of the original invoice after all costs, write it off.
Question 2: What's The Customer Lifetime Value?
One-off project client? Different equation than a repeat customer.
Calculate:
• How much they've paid you historically
• How much they're likely to pay you in future
• Whether this relationship is already dead
Example:
They owe you $3,000. But they've paid you $40,000 over three years and typically give you $15,000 annually.
That's not a debt recovery decision. That's a customer retention decision.
Rule:
If future revenue exceeds 5x the outstanding debt, handle it gently. The relationship has residual value.
But: If they've never paid on time and the relationship is already poisoned, stop pretending there's a future. Collect and move on.
Question 3: Is This A Pattern Or An Exception?
One late payment from an otherwise reliable client is different to serial lateness.
Look at:
• Their payment history with you
• Whether the excuse sounds legitimate
• If they're communicating or ghosting
Example:
Client always pays within seven days. This time it's 45 days late and they're not responding.
Something's wrong. They might be insolvent. Your debt might be about to get in line behind others.
Rule:
Sudden changes in payment behaviour signal financial distress. Act fast. The longer you wait, the more creditors get in front of you.
Question 4: What Message Does This Send?
Your other clients are watching.
If you write off debts publicly (or word gets around), you've just told everyone that payment is optional.
If you pursue every debt aggressively, you've told everyone you're serious about terms.
Consider:
• Whether this client talks to your other clients
• What your team sees (writing off teaches them payment doesn't matter)
• Industry reputation (tradies talk, accountants talk, everyone talks)
Rule:
Never write off debt from clients who operate in your primary market. The reputational cost exceeds the financial cost.
The Decision Matrix
Now combine the answers.
| Scenario | Action |
|---|---|
| High recovery cost (>50% loss) + no future value + pattern of lateness | Write it off. Tax deduction is your best outcome. |
| Low recovery cost (<30% loss) + high future value + first offense | Handle internally with firm but fair approach. Keep the relationship. |
| Medium recovery cost + no future value + ghosting/dishonesty | Escalate to professional recovery. Use FINAL NOTICE or similar. |
| Any cost + serial pattern + operating in your market | Pursue aggressively. This is reputation defense, not debt recovery. |
When To Write Off
Write off debt when:
The client is genuinely insolvent.
If they've entered administration or bankruptcy, your debt is unsecured. You're behind secured creditors, employees, and the tax office. Recovery is unlikely. Write it off and claim the deduction.
Recovery cost exceeds 50% of the debt.
You're not running a charity for debt collectors. If the math doesn't work, the math doesn't work.
The debt is under $500 and they're uncontactable.
Small claims court costs more in time than the debt is worth. Take the tax deduction and tighten your payment terms for next time.
You have no written agreement and they're disputing the work.
Without clear terms or acceptance of the work, legal recovery is expensive and uncertain. Lesson learned. Written agreements from now on.
The stress is genuinely damaging your health.
Sometimes walking away is self-care. No invoice is worth a breakdown.
When To Fight
Fight for the debt when:
They can pay but won't.
Social media shows new purchases. They're still operating. They paid other suppliers. They're choosing not to pay you. Don't accept that.
It's a substantial amount relative to your revenue.
If the debt represents more than 5% of your annual revenue, you can't afford to write it off. Fight.
You have clear documentation.
Quote accepted. Work completed. Invoice issued. Terms stated. This isn't a dispute. It's non-payment. Pursue it.
They're stalling, not struggling.
Excuses change. Promises made and broken. Classic delay tactics. They're hoping you'll give up. Don't.
Other clients will hear about it.
If writing off this debt teaches your market that you don't enforce payment, the cost compounds across every future invoice. Fight to set the standard.
The Middle Option (Where We Come In)
Most businesses think it's binary: chase it yourself or write it off.
There's a third option.
Professional escalation that sits between friendly reminders and legal action.
What this looks like:
- Automated escalation that gets progressively firmer
- Professional pressure without aggression
- Clear timeline the debtor can see coming
- Most cases resolve before reaching debt collectors
- You stay hands-off; we handle the chase
This works when the debt is worth recovering (>$1,000 typically), you have clear documentation, the debtor is contactable and operating, and you want the money but not the stress.
We handle everything from first firm notice to pre-legal demand. Most pay. Some need collectors. None require you to keep chasing.
The Tax Deduction Question
"But I can write it off, right?"
Yes. Bad debts are tax-deductible in Australia if:
- The income was previously included in your assessable income
- You've made genuine attempts to recover the debt
- You reasonably believe the debt is irrecoverable
But here's the math:
$2,000 bad debt written off
Tax rate: 30% (assuming company tax rate)
Tax saving: $600
You just worked for free and got $600 back.
That's not a win. That's a 70% loss.
The tax deduction softens the blow. It doesn't make writing off debt a good financial decision.
The Real Cost Of Writing Off
Every debt you write off costs you three times:
The invoice amount
You've delivered work. Not been paid. That's direct loss.
The opportunity cost
Time spent on that job could have gone to a paying client. You can't get those hours back.
The precedent
Other clients see you don't enforce payment. Late payments increase across your entire book.
Most businesses only count the first cost. The second and third costs are what kill businesses slowly.
What To Do Right Now
If you've got debt outstanding:
- Run the four questions on every unpaid invoice over $1,000
- Write off anything that fails the 50% recovery rule
- Escalate anything that passes it
If you're not sure:
Book a call. We'll review your outstanding debts and tell you honestly what's worth pursuing and what's worth writing off.
No charge for the assessment. No obligation to use us.
Just straight advice on what makes financial sense.
Final Word
Writing off debt isn't weakness. Sometimes it's the smart move.
But writing off debt too early is expensive. And writing off debt that's recoverable trains your market to pay late.
Know the difference.
Run the math. Make the decision. Move forward.
And if you decide it's worth fighting for, we'll handle the fight.