The Real Cost of Writing Off Bad Debt: Why €340K Isn't Really €340K

The quarterly finance review. Your CFO pulls up the aging report.

"This €340,000 invoice from the Barcelona distributor. It's been 18 months. Legal says jurisdiction is complicated. Sales says the relationship is salvageable. What are we doing?"

Silence.

Then someone says it: "Maybe we should just write it off."

The room exhales. Decision made. Moving on.

The P&L will show a €340,000 bad debt expense. Clean. Done.

But the real cost isn't €340,000.

It's closer to €1.7 million.

Not all write-offs are wrong. Some are necessary and rational.

Here's when to write off vs. when to escalate:

Write Off When:

• Debtor is bankrupt (confirmed, not rumored) and assets are liquidated
• Amount is below cost of recovery (e.g., chasing €2,000 internationally may cost €5,000)
• Fraud confirmed and legal pursuit is uneconomical
• Debtor is untraceable after exhaustive skip-tracing

DON'T Write Off When:

• "It's been a long time and we're tired" — Time passed is not a reason. Recoverability is.
• "The relationship matters" — A client who hasn't paid in 18 months has already damaged the relationship. You're pretending it's intact.
• "Legal is complicated" — Complicated ≠ impossible. Engage specialists.
• "We don't want to seem difficult" — Your debtor is betting on this. Don't validate their strategy.

They treat write-offs as a binary decision:

Option A: Keep chasing internally (and burning team time) Option B: Write it off (and accept total loss)

They ignore Option C: Engage external specialists who recover on a contingency basis.

Why do they ignore Option C?

• "It's expensive" — Contingency fees typically range from 15-35%. But 70% of something is better than 100% of nothing.
• "It'll damage the relationship" — The relationship is already damaged. The debtor just hasn't admitted it. Neither have you.
• "We can handle it internally" — You've been handling it for 18 months. How's that going?

The companies that minimize bad debt write-offs are the ones who escalate EARLY, not late.

They engage specialists at month 6, not month 18.

By month 18, leverage is gone. Contacts have changed. Debtor has learned you won't act.

Here's the insidious part:

Every write-off you do signals to the rest of your receivables base that delayed payment is consequence-free.

Your other clients are watching.

If Client A went 18 months without paying and faced no real escalation, why should Client B pay on time?

Write-off culture spreads.

Before you know it:

• Average DSO climbs from 45 days to 73 days
• "Just give them another month" becomes standard practice
• Your AR aging report looks like a wine cellar (older is not better)

The CFOs who aggressively minimize write-offs aren't being ruthless. They're being rational.

They understand that every write-off is a 5x cost multiplier and a signal to the market that you don't enforce terms.

1. €1 written off = €5-10 in replacement sales required (depending on margin).
2. Write-offs cost team time, opportunity cost, and morale — not just the invoice amount.
3. Engage specialists at month 6, not month 18 — Leverage decreases over time.
4. Reserve write-offs for bankruptcies and uneconomical pursuits — Not for "we got tired."
5. Every write-off teaches other clients to delay — Enforce consequences systematically.

Writing off €340K isn't a financial decision.

It's a statement about how seriously you take your receivables.

And your other clients are listening.

Collecty specializes in late-stage B2B receivables recovery (90+ days overdue). We work on contingency, so you only pay when we recover.

If you have receivables you're considering writing off, let us evaluate them first.

Contact Collecty to discuss your aging receivables.