Bad debts: write off, collections, or one more round?

Customer won't pay, won't respond, and you've sent every reminder in the book. Now what? Here are the three paths: write it off, send it to collections, or take legal action.

Roughly 1–3% of your invoices will ultimately go unpaid. How you handle them has both tax and cash flow implications.

Path 1: Write it off as a bad debt

For small amounts (< €500–1,000), pursuing collections simply isn't economically worth it. Write it off and reclaim the VAT.

• Internal decision: the receivable is uncollectable.
• In your bookkeeping: debit "Bad debts" (expense), credit "Accounts receivable".
• VAT: you can reclaim the VAT on an irrecoverable debt from the Tax Authority.
• Keep the file for 7 years.

Path 2: Collections

For amounts between €500 and €10,000. Choose between:

• Amicable route: a collections agency (Bierens, Graydon, Intrum). Fees typically 15–25% of the amount recovered.
• No cure, no pay: many collections agencies work on this basis. Low barrier to entry.
• Legal proceedings: if the amicable route fails → summons. Legal costs apply.

Path 3: Legal action

For large amounts (€10,000+) or matters of principle. Solicitor, small claims court (up to €25,000), or district court. Not the go-to route for the average SMB dispute.

Prevention is better than cure

• Credit-check new business customers (via Creditsafe, Graydon).
• For large orders: require a deposit (30–50%).
• Consider credit insurance if you consistently carry high debtor risk.
• Keep on top of payment reminders.

See also: invoicing guide, cash flow tips.