bad debt
/bæd dɛt/
Meaning
An outstanding amount of money owed by a debtor that is unlikely to be paid and is written off as a loss. This typically happens when a customer goes bankrupt or disappears. It is recorded as an expense on the company's income statement.
Examples
-
The company had to write off $10,000 as bad debt after the client went bankrupt.
The company had to write off $10,000 as bad debt after the client went bankrupt.
-
We need to improve our credit checks to minimize the risk of bad debt.
We need to improve our credit checks to minimize the risk of bad debt.
-
A high level of bad debt can seriously damage a startup's cash flow.
A high level of bad debt can seriously damage a startup's cash flow.
-
They had to report a significant amount of bad debt in their annual financial report.
They had to report a significant amount of bad debt in their annual financial report.
-
Our legal team is trying to recover what they can before we declare it as bad debt.
Our legal team is trying to recover what they can before we declare it as bad debt.
Common Mistakes
-
✗ We have many bad debts this year.
✓ We have a lot of bad debt this year.
While 'debts' can be plural when referring to individual loans, 'bad debt' is typically used as an uncountable noun representing the total written-off value in accounting.
-
✗ The client didn't pay, so we have a bad debit.
✓ The client didn't pay, so we have a bad debt.
Do not confuse 'debit' (an accounting entry) with 'debt' (money owed). Also, remember that the 'b' in 'debt' is silent.
Related Expressions
Practice
-
When a customer goes bankrupt, the unpaid invoice usually becomes ___.
💡 Money owed that cannot be recovered
Show answer
bad debt
-
To avoid ___, we now require all new clients to pay a deposit upfront.
💡 Unrecoverable outstanding payments
Show answer
bad debt