The particulars vary by industry, product/service, order size, etc. Some companies “never” write off, equating it with failure. Other organizations write off small dollars, though what is small to one is not small to others. Some write off any receivable that is 6 months old, since the statistics indicate that once a debt is six months old, the debt is usually not collected without a collection agency or lawyer (law suite). Of course, uncollected receivables decrease in value based on age (see below). GAAP anticipates and accounts for bad debt in its allowance for bad debts and subsequent write-off method.
We recommend you discover what your expected loss might be. Look three years back at your uncollectibles, which will give you your best estimate of your uncollectible percentage. Based on those numbers, you can determine a small dollar write-off limit that a collector could write off without approval, and amount over the “'smal”' dollar limit for which you could require a second signature.
The information below shows that six months is key. Collection efforts need to begin immediately and a phone call is the best practice to getting paid.
From PRP (Professional Recovery Personnel, Inc.)
Decrease in Value as Receivables Age
< 30 days 90-95%
30-59 days 70-85%
60-89 days 60-75%
90-120 days 15-50%
And from DLR Firm (Dynamic Legal Recovery)
Current $1.00 100%
One Month $ .97 -3%
Two Months $ .90 -10%
Three Months $ .80 -20%
Four Months $ .73 -23%
Six Months $ .45 -55%
One Year $ .23 -77%
Three Years $ .12 -88%