--- title: "Year-End Receivables Review & Writing Off Bad Debt | MCC" description: "Review aging, clean up and write off uncollectible invoices correctly. Worked $1,500 write-off example." url: "https://mcc-solutionsnj.com/bookkeeping/guides/year-end-accounts-receivable-review-and-bad-debts" --- Bookkeeping guide · Updated October 12, 2026 # Year-End Accounts Receivable Review and Bad Debts Unpaid invoices make your business look more profitable than it feels. Before the year closes, a review of receivables shows what is really owed, what is doubtful and what has to be written off. How write-offs are treated for tax depends on your accounting method, so involve your preparer. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** For a year-end receivables review, run an aging report as of December 31 and compare its total to the receivables balance on the balance sheet. If they differ, find out why before doing anything else; common causes are unapplied payments and credits not matched to invoices. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Trial balance explained](/bookkeeping/guides/trial-balance-explained) · [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) **Free tools:** [Free invoice template](/bookkeeping/free-invoice-generator) · [How many sales do I need to break even?](/bookkeeping/break-even-calculator) [See your days sales outstanding](/bookkeeping/days-sales-outstanding-calculator) before you review old balances. [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## Start with the aging report Run an aging report as of December thirty-first. It groups unpaid invoices by how long they have been outstanding. Compare the total to the receivables balance on the balance sheet. If they differ, find out why before doing anything else. Common causes are unapplied payments, credits not matched to invoices and invoices entered in the wrong year. Contact customers with older balances and ask for a payment date. Write down what each one says and when. ## Clean up what is not really a receivable Apply customer payments that were recorded as deposits, match credit memos to invoices and remove duplicates. Check for invoices to customers who have already paid in another way, such as in cash or through a processor. Cleaning these shows the true outstanding amount. If you are a cash method taxpayer, unpaid invoices have not been counted as income yet, so your focus is on cash flow rather than on write-offs. ## Decide what is uncollectible A debt is typically considered uncollectible when you have good reason to think it will never be paid, such as bankruptcy, a closed business, or a customer who cannot be found. Keep evidence of your efforts: reminders, letters, calls and the customer's replies. Time alone is not a decision. Document why each invoice is written off. Check whether the invoice included sales tax. Some states allow a recovery of tax paid on uncollected sales, with specific procedures. ## Record the write-off properly Use a bad debt expense account and reduce the receivable balance with a dated entry, rather than deleting the invoice. If you later collect a written-off amount, record it as a recovery. Some accrual businesses also set up an allowance for doubtful accounts, a decision to review with an accountant. Keep a list of written-off customers so that you do not extend credit to them again without thought. ## Want us to handle it? We close the year with you: accounts reconciled, 1099s sorted, and books your tax preparer can use. **Price:** Free review of your books first, then a written quote before any work starts. [Get a free review and quote](/bookkeeping/#interest) [1099 and year-end cleanup](/bookkeeping/1099-and-year-end-books-cleanup) ## Improve the process for next year Review what made invoices late. Perhaps terms were unclear, invoices were sent late, or there was no reminder system. Fixes include sending invoices the same day, stating terms plainly, asking for deposits on big jobs and using automatic reminders in your software. A short weekly look at the aging report prevents the end-of-year surprise. ## A short script for collection calls A calm, factual call tends to work well: state the invoice number, date and amount, ask whether anything is wrong with it, and ask for a payment date. Follow with an email recapping the conversation. If the customer disputes the invoice, record the reason and decide whether a credit is warranted. These notes later serve as the evidence that you tried to collect, which supports the write-off decision if it comes to that. ## Worked example with numbers A $1,500 invoice is 180 days past due and the client has closed. After reasonable collection attempts, write it off. Use bad debt expense of $1,500 and reduce receivables by $1,500. If the client later pays, reverse it. Deleting the invoice would hide the revenue that you actually recorded. ## Mistakes that cost money Leaving dead invoices on the books. Deleting instead of writing off. No written write-off policy. ## Check your work The aging total should equal receivables on the balance sheet. ## Common questions **Should I write off small invoices to clean up my reports?** Only if they are truly uncollectible and you document why. Do not use write-offs just to tidy a report. **Does a write-off cancel the customer's debt?** No. Writing it off in your books is an accounting step, not forgiveness. Whether to keep trying to collect is your decision. **Who should decide the tax treatment?** Your CPA or preparer, based on your accounting method. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) More guides - [Prepaid Expenses and Accrued Liabilities at Year End](/bookkeeping/guides/prepaid-expenses-and-accrued-liabilities-at-year-end) - [Startup Costs: Records to Keep Before You Open](/bookkeeping/guides/startup-costs-records-before-your-business-opens) - [Equipment Purchases: Records for Expense vs Capitalize](/bookkeeping/guides/equipment-purchase-records-expense-or-capitalize) - [Fixed Asset Register: How to Build and Maintain One](/bookkeeping/guides/fixed-asset-register-how-to-build-and-maintain) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Accounting Student Study Workbook Type the entries, see the statements update and check your work against the answer key. [See what's inside ($19)](/toolkits/accounting-student-study-workbook) [Free sample](/toolkits/accounting-student-study-workbook#free-starter)14-day full refund [![Cover of Bookkeeping Fundamentals (ebook) by Matthew Colt](/img/toolkits/bookkeeping-fundamentals-ebook/cover.webp)](/toolkits/bookkeeping-fundamentals-ebook) From the bookshelf ### Bookkeeping Fundamentals A college-level bookkeeping course, without the tuition. By Matthew Colt, $9.99 as an ebook (EPUB and PDF). [See the book](/toolkits/bookkeeping-fundamentals-ebook) [Read the first pages free](/toolkits/bookkeeping-fundamentals-ebook#free-starter) ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)