Question

Type or paste question here

1. Why is it often a good practice to simply write off a bad debt rather than pursue payment from a credit customer?

Answer 1

Write off of bad debts and pursuing payment from a credit customer depends on cost benefit analysis. If the cost of pursing the payment from a credit customer is more than the benefits to be received it is better to write off bad debts since the organisation can save the cost and time which will be incurred in collecting payments from credit customer. The cost usually involves like legal fees, payment to advocates, credit department collection staff cost, etc Hence it makes sense to write off if the benefits receivable is less than cost incurred.