First off let me explain what each option means. When we\u2019re talking about writing down something, say receivables, what we mean is that you create an allowance account with an opposite sign onto the balance sheet so that it decreases the receivable account. Now as to writing balances off means that they\u2019re taken off from the balance sheet completely. Note that the opposite entry for both is an expense entry on the income statement. It\u2019s just all about what\u2019s left or not left onto the balance sheet.\u00a0<\/p>\n
As to whether to write down or off, it\u2019s judgmental, but there are conditions to consider.<\/p>\n
Is it just bad payment discipline and irregular payments you\u2019re already aware of or is it all of a sudden really bad situation your customer is in and is it possible they\u2019re going into bankruptcy? It\u2019s one or the other, which defines how bad the situation, really is with your balance.<\/p>\n
At the end of the day it comes down to a question how doubtful you see the collection to be. If it\u2019s more probable that you\u2019ll get paid than not, it\u2019s write down and not write off you should do. Note that the client is still obliged to pay regardless what you decide to do. It\u2019s more of how fair and true you want to keep your accounts really. There\u2019s no real reason to keep a balance that\u2019s likely not to be collected on the balance sheet, is there?<\/p>\n","protected":false},"excerpt":{"rendered":"
First off let me explain what each option means. When we\u2019re talking about writing down something, say receivables, what we mean is that you create an allowance account with an opposite sign onto the balance sheet so that it decreases the receivable account. Now as to writing balances off means that they\u2019re taken off from […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26,78],"tags":[],"class_list":["post-3897","post","type-post","status-publish","format-standard","hentry","category-2-processes","category-2-8-revenue-and-receivables"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=3897"}],"version-history":[{"count":2,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3897\/revisions"}],"predecessor-version":[{"id":3899,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/3897\/revisions\/3899"}],"wp:attachment":[{"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=3897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=3897"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=3897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}