Glossary definition

What is a bad debt?

A bad debt is one that will not be paid, typically because the debtor is a company that no longer exists or isn’t able to pay for some other reason.

The debt is therefore written off and an allowance for bad debt is made within the accounts.

Subscribe to the Sage Advice enewsletter

Join over 500,000 UK readers and get a roundup of our best business advice in your inbox every month.