No. Writing off a bad debt is a decision that the money will not be collected, and it removes an asset from the books. An AI agent can prepare the case: ageing, collection history, insolvency notices, provision held and recovery options. A person with write-off authority approves, and must not manage the account's collections or handle its cash.
Why can't a clear rule settle it?
Some write-offs look mechanical. A customer is in liquidation, the liquidator says unsecured creditors will receive nothing, and the debt is small. Even then, the decision has consequences beyond the ledger: it ends collection efforts, may affect tax treatment, and closes off options such as selling the debt or pursuing a guarantor.
More importantly, write-offs are a classic way to hide theft. Someone who has taken a customer's payment can make the customer's balance disappear by writing it off as bad. If the same person handles cash, chases debts and approves write-offs, nothing stops them. That is why write-off authority sits with a person outside collections and cash handling, at every value.
What can the agent prepare?
The case file, at depth 2: - the invoices, their ages and any partial payments; - every contact made to collect, with responses; - any dispute history; - insolvency notices, liquidator reports or court records; - the provision already held against the debt, from the bad debt provision workpapers; - guarantees, retention of title or security that might still recover something; - options: continue collecting, refer to an agency, sell the debt, write off.
The entry: - a draft write-off journal, releasing the provision and removing the receivable.
The check against theft: - a comparison of receipts from the customer in the bank feed against what was allocated to their account. Money received but not allocated is the pattern to look for.
Who decides, and at what level?
| Write-off value | Approver | Must not be |
|---|---|---|
| Below a small threshold | Credit manager | The credit controller who chased the account |
| Mid-range | Financial controller | Anyone in collections or cash allocation |
| Above a high threshold | Finance director | As above |
| Any value with a related party | Finance director | Anyone connected to the customer |
The thresholds are set by the business and recorded in the authority matrix. The agent checks that the approver on each write-off has the authority for its value and is not on the excluded list.
An illustrative example
Take a wholesale florist. A restaurant customer owes 6,800 across nine invoices, the oldest 150 days overdue. The restaurant has closed.
The agent prepares the case. Collection contacts stopped two months ago. Companies registry records show the business entered liquidation. The liquidator's first report suggests unsecured creditors will receive little. A full provision is already held.
Its theft check finds something else. Two payments of 800 from the restaurant's bank arrived in the florist's account three months ago, but were allocated to a different customer's account. The agent includes this in the case. The financial controller, who has no collections role, reviews it, has the misallocation investigated, and approves a write-off of 5,200 rather than 6,800 once the payments are reallocated.
How is a trade write-off different from a loan write-off?
For a trading business, a bad debt is an unpaid invoice. For a lender, a loan write-off involves regulatory reporting, provisioning rules and often continuing recovery after write-off. The principle is the same: the agent prepares, a person decides. The lending case is covered in whether an AI agent can write off a loan and how to prepare loan write-off recommendations.
What controls make it safe?
- No write-off capability for the agent. It drafts; the ledger requires an approver.
- Authority matrix enforced. Value and independence checked for every approval.
- Theft check on every case. Receipts compared with allocations.
- Collections end only on approval. Until then, the account stays live.
- Every write-off filed. Case, approver and reason.
Write-offs feed into the year-end judgements a signatory must accept, covered in whether an AI agent can sign off a set of accounts. The wider controls are in AI agents for finance: books you can audit.
Questions people ask
Can the agent recommend writing off many small balances at once?
Yes, as a batch for approval. Each item should still carry its case summary, so the approver can spot a balance that does not belong.
What happens if a written-off customer later pays?
The agent can spot the receipt and draft the entry to reinstate and clear the debt. A person approves it, and the original write-off decision is reviewed.
Should the customer be told about the write-off?
Usually not. A write-off is an internal accounting decision; the customer still owes the debt unless you formally release them.