Writing Off Bad Debt: How Freelancers Handle Unpaid Invoices

When should you write off an invoice?

There is no universal rule for when to write off, but these are clear signals that an invoice is unlikely to be collected:

• The client is unreachable— emails bounce, phone numbers are disconnected, the website is down. If you can't contact them, you can't collect from them.
• The company has been dissolved or is insolvent— check public registers (e.g., Chamber of Commerce, Companies House). If the business no longer exists, the debt is effectively dead.
• 90+ days overdue with no response to reminders— if you've followed your reminder timeline and received no response or payment after 90 days, the probability of collection drops significantly.
• The cost of collection exceeds the debt— legal action, collection agencies, and small claims courts all cost money and time. For a €300 invoice, the recovery cost may be higher than the debt itself.
• The client disputes the work and you can't resolve it— if there's a genuine disagreement about the quality or scope of the work, and negotiation has failed, a partial or full write-off may be the pragmatic choice.

Writing off is not giving up — it's recognizing reality and keeping your financial records accurate. An unpaid invoice that sits in your books forever inflates your reported revenue and distorts your tax obligations.

Write-off vs. delete: why it matters for your records

Freelancers sometimes delete an unpaid invoice to make the problem disappear. This is a mistake. Here's why:

The bottom line: always write off, never delete. A written-off invoice is a formal acknowledgment that the debt is uncollectible. A deleted invoice creates a gap in your records that tax authorities will notice.

Full vs. partial write-off

Not every bad debt is a total loss. Sometimes a client pays some but not all of the invoice. In that case, you record the payment and write off only the remaining balance.

This keeps your records precise: the invoice shows exactly what was received, what was written off, and the final status is “Written Off” with a clear breakdown.

How to write off an invoice in Bontello

The process is straightforward and preserves your full audit trail:

1. Open the invoice from your invoice history.
2. Click Write Off. Bontello will ask you to confirm the write-off amount (the full balance or a partial amount).
3. Add a reason (e.g., “Client company dissolved” or “Unreachable after 90 days”). This is optional but strongly recommended for your records and for any future tax queries.
4. Confirm. The invoice status changes to Written Off. The amount is excluded from your revenue totals and flagged as bad debt.

If the client unexpectedly pays later, you can reverse the write-off: record the payment, and the invoice status updates accordingly. The write-off and reversal both stay in the history for a complete audit trail.

Tax implications of write-offs in the EU

Tax treatment of bad debt varies by country, but the general principles in the EU are:

• Income tax deduction— if you reported the invoice as income (which you should have, since most EU countries use the accrual or invoice basis), you can deduct the bad debt as a business expense. This reduces your taxable income for the year in which you write off the debt.
• VAT recovery— in many EU countries, you can reclaim the output VAT you paid on an invoice that turns out to be uncollectible. The rules and thresholds vary: Germany requires proof of insolvency or a court order, the Netherlands allows a bad debt VAT claim after 1 year of non-payment, and France allows it once the debt is definitively uncollectible.
• Documentation requirements— keep records of your collection attempts (emails, reminders, letters). Tax authorities may ask for evidence that the debt is genuinely uncollectible before accepting the deduction.

How write-offs affect your reports

A properly recorded write-off adjusts your financials in several places:

• Dashboard— written-off amounts are excluded from your outstanding receivables. Your dashboard shows a realistic picture of money you can actually expect to receive.
• Annual tax report — write-offs appear as bad debt expenses in your annual report, reducing your net profit and therefore your tax liability.
• VAT return— if you reclaim VAT on the written-off invoice, it reduces your output VAT for that quarter.
• Client history— the written-off invoice stays on the client's record, so you can see their full payment history, including the bad debt. This is useful if the same client approaches you for future work.

Key takeaways

• Write off an invoice when the client is unreachable, insolvent, or 90+ days past due with no response.
• Never delete an unpaid invoice — always write it off to preserve your audit trail and sequential numbering.
• Partial write-offs handle cases where the client paid some but not all of the amount owed.
• In the EU, bad debt write-offs can reduce both your income tax and output VAT — consult your accountant for country-specific rules.
• Keep records of your collection attempts as evidence for tax authorities.
• Written-off invoices adjust your dashboard, annual report, and VAT return automatically.