What is a doubtful debtor?
A doubtful debtor is a customer with an outstanding debt whose recovery is uncertain. You do not yet know whether the invoice will become uncollectible, but there are clear indications that full payment is doubtful.
Examples include persistent late payments, financial difficulties affecting your customer, payment reminders that produce no results or a case that requires prolonged follow-up.
As long as the loss has not been confirmed, the customer is considered a doubtful debtor rather than a debtor whose debt is uncollectible. This distinction determines how you can record the debt in your accounts.
When should you classify a receivable as doubtful?
As soon as objective evidence indicates that payment by the due date or full recovery is uncertain. Do not wait until bankruptcy proceedings have officially concluded, as you may already be too late.
Review this at least when closing your annual accounts. Which receivables represent a genuine risk? This gives you a more realistic picture of your financial results and prevents your balance sheet from presenting an overly optimistic view.
Support your assessment for each case
You must be able to justify the classification of doubtful debts for each individual customer. A general provision covering all customers, without specific justification for each case, is usually insufficient.
Therefore, keep all documents that demonstrate why a particular receivable is uncertain:
- Payment reminders and demands for payment, including dates.
- Email correspondence about the payment.
- The formal notice of default and proof of sending.
- Any payment plan agreements and whether they were respected.
- Indications of your customer's financial situation.
How do you record doubtful debts in your accounts?
In Belgian accounting, this generally involves two steps:
| Step | Accounting entry | What it does |
|---|---|---|
| 1. Reclassification | Transfer from 400 Trade receivables to 407 Doubtful debtors | The receivable remains on the balance sheet under current assets but is identified as a risk |
| 2. Impairment | 6340 to 409 Recorded impairment losses on trade receivables | You recognise the expected loss in your financial results without definitively writing off the debt |
Your balance sheet therefore shows two things separately: the amount still outstanding and the portion you do not expect to recover.
Practical example
A customer owes €3,025: €2,500 excluding VAT plus €525 VAT. You estimate that half of the amount will not be paid.
- You transfer the full receivable of €3,025 to account 407.
- You record an impairment loss based on the estimated loss excluding VAT: €1,250, using accounts 6340 and 409.
This prevents you from writing off the entire invoice amount while the loss has not yet been confirmed.
When can you definitively write off a debt?
Only when the loss is sufficiently certain. This may be the case following completed insolvency proceedings, a clearly agreed partial debt waiver, unsuccessful recovery attempts or other individual supporting documents demonstrating that payment will no longer be received.
At that point, you definitively remove the receivable from your accounts and reverse or settle the previously recorded impairment, ensuring that the same loss is not recognised twice in your financial results. In practice, this is often done through account 642, Losses on trade receivables.
VAT on doubtful debts
This is where mistakes are most common.
In Belgium, you cannot recover VAT simply because you have transferred a customer to account 407. Reclassifying a receivable as doubtful is an accounting assessment, not proof that the debt is uncollectible.
To recover VAT, non-payment must be sufficiently established, and the appropriate formalities and supporting documents must be in place. The exact procedure depends on the case, the timing and the available evidence.
Always discuss this with your accountant or VAT adviser.
How should you deal with a doubtful debtor?
If your invoice remains unpaid, start by contacting your customer personally. They may have a valid reason for not making the payment (yet). Agreeing on a payment plan could be a solution.
Is your undisputed invoice still unpaid? Unpaid can help you recover it legally through the IOS procedure, without involving a judge or lawyer.
Two-stage solvency assessment
At Unpaid, your debtor's solvency is checked twice. First, we carry out a solvency check when you submit your case. The bailiff then conducts a more thorough assessment of your customer's financial situation.
This allows us to determine whether further recovery action is worthwhile and helps avoid unnecessary costs. If the assessment is positive, the bailiff can formally serve the payment demand within five working days.
What if your debtor cannot pay?
If the bailiff's assessment shows that your customer is insufficiently solvent, this can help justify classifying the receivable as doubtful in your accounts.
Once the debt has been sufficiently established as uncollectible, you can also obtain a free certificate of uncollectibility through Unpaid.
This certificate serves as important supporting evidence to demonstrate that your receivable is uncollectible to the VAT and tax authorities. This allows you, provided the legal conditions are met, to recover VAT previously paid and correctly account for the loss for tax purposes.
Don't let your outstanding invoice drag on
Submit your case easily online through Unpaid. We assess your debtor's solvency and help you legally recover your outstanding B2B invoice.
Would you like some more information before using our services? Call us, without obligation, on +32 9 396 34 00 or schedule a video meeting at a time that suits you best.
Frequently asked questions
How do I write off a doubtful debt?
First, you generally transfer the regular trade receivable to account 407, Doubtful debtors. You then record an impairment loss for the estimated amount that will not be recovered. Only when the debt has been sufficiently established as uncollectible can you definitively write it off.
What is a provision for doubtful debts?
Business owners generally use this term to refer to the amount recorded for an expected loss on a customer whose payment is uncertain. In accounting terms, trade receivables are often subject to a specific impairment loss rather than a general provision.
Can I recover VAT on doubtful debts?
Not automatically. Simply reclassifying a receivable as doubtful is not sufficient. The debt must be sufficiently established as uncollectible, and you must comply with the supporting documentation and formal requirements under Belgian VAT regulations.
A certificate of uncollectibility, which you can obtain free of charge through Unpaid under certain conditions, can serve as important supporting evidence when reclaiming VAT previously paid.
When should I initiate legal debt recovery?
If payment reminders and formal notices of default have produced no results, the invoice is undisputed and you are wondering what to do when your customer doesn't pay, waiting any longer is often more costly than taking action.
This is when legal debt recovery becomes relevant, especially if you regularly deal with late-paying customers whose outstanding B2B invoices continue to affect your cash flow.
