Write-off
A write-off removes a balance from accounts receivable. Whether it was a decision or a default is what separates a healthy one from a loss.
Updated
A write-off is the removal of an open balance from accounts receivable when it will not be collected. It closes the account: the balance stops being pursued and stops appearing as revenue in the pipeline.
Write-offs fall into two very different groups, and grouping them together is how the useful signal is lost. Some are expected and agreed — a contractual adjustment is the clearest example, and it is not a loss at all. Others are avoidable: a claim filed too late, a denial nobody appealed, a balance abandoned because working it cost more than it was worth.
In practice
The number that matters is not how much was written off but how much of it was avoidable, and answering that requires the reason to be recorded at the moment of the write-off. A system that records only an amount can tell you what left A/R; it cannot tell you whether anything should have been prevented.
The uncomfortable case is the write-off that is genuinely the right decision. Pursuing a small balance can cost more than the balance, and writing it off is sound. That only stays true if it was a decision — a write-off that happens because a deadline passed unnoticed is not a judgment call, it is the record of one that was never made.
Commonly confused with
- Contractual adjustment: A contractual adjustment is the agreed reduction to the contracted rate on a paid claim. Both leave A/R, but one is the contract working and the other is revenue not collected.
- Bad debt: Bad debt is one category of write-off — a balance a patient owed and did not pay. Not every write-off is bad debt.