write off
Write off is when a business officially admits that money it was owed, or something it owns, is worth nothing and removes it from its books.
In plain English
So what happens to that customer who owes you ₦500,000 and has now changed his phone number, moved house, and gone calm on WhatsApp for two years?
At some point, the honest thing to do is stop pretending you will ever see that money. In business terms, that admission is called a write off. You take the debt out of your books as an asset, because listing it as something you own when you clearly cannot collect it would be lying to yourself and to anyone reading your accounts.
It is not only about unpaid debts. A shop owner in Yaba might write off a batch of phone accessories that got soaked in flood water and are now useless. A company in Manchester might write off old machinery that has broken down beyond repair and has no resale value left. In both cases, the item still technically exists somewhere, but its value to the business is gone, so the books must reflect that truth.
Writing off is not the same as giving up on collecting the money entirely. Sometimes a business still tries calmly through legal channels even after writing it off for accounting purposes. The write off simply keeps the financial statement honest in the meantime, so profit is not overstated and nobody is misled about how healthy the business really is.
For someone in the diaspora sending money home to support a family business, this matters more than it looks. If the business keeps listing bad debts as assets, the numbers look better than reality, and that can lead to poor decisions, like expanding when there is actually no cash to expand with.
A Lagos electronics distributor sold goods worth ₦1,200,000 to a retailer who later shut down and disappeared. After a year of failed attempts to collect, the distributor writes off the ₦1,200,000 as a bad debt, reducing its profit for that year but keeping its accounts truthful.
Questions people ask
Does writing off a debt mean the customer no longer owes the money legally?
No. Writing off is an accounting decision, not a legal forgiveness of debt. The business can still pursue the debtor in court or through collections even after writing it off in the books.
How does a write off affect a company's profit?
It reduces profit for that period because the lost amount is recorded as an expense or loss, which gives a more honest consider of how the business actually performed.
Can a written off asset ever be brought back onto the books?
Yes, if the money is later recovered or the asset regains value, the business can record that recovery as income at that time, separate from the original write off.
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