Healthy Write-off Conversations using Xero and Link

Why write-offs are a management accounting tool, not a reflection of your team

Most people in accounting know two things about write-offs: they're bad, and you don't want them associated with your name. What most people don't know is how they're calculated, why they occur, or what to do to avoid them. That gap is where unhealthy write-off conversations are born.

Three causes of write-offs

Write-offs have three causes, in order of likelihood: pricing, process, and people. Pricing is the most common. The time we know least about a job is when we price it — usually at the start, before the work reveals its complexity. If that fee hasn't been reviewed in two or three years, the job budget it generates is stale before work begins. Process is the second cause — changes in complexity, new information discovered mid-job, or scope that grew without the fee following it. People are the least likely cause. An accountant with four years of experience has somewhere between five and six thousand hours on the job. By that point, it's probably not a Sarah problem.

Write-offs are not good or bad

This matters because write-offs are not good or bad. They're a management accounting tool — a signal that tells you something about pricing, process, or delivery. They are not a reflection of an individual's skill or experience, and treating them that way is the fastest way to ensure the same write-offs appear on the same clients on the same jobs next year.

What a healthy write-off conversation sounds like

A healthy write-off conversation sounds nothing like "hey James, you wrote off $2,800 last month — sharpen up." That tells James nothing useful. A healthy conversation asks open questions: was there anything unusual about this job? Was it more complex than anticipated? Should we be charging separately for some of this work? Is it likely to take this long next year? These questions get to the root cause, and the root cause is almost always something a partner can act on in a future pricing conversation. One good conversation per person per month, focused on the largest write-off, is enough to change the pattern over time.

The best time to have this conversation

The best time to have this conversation is while the job is still in progress — while there is still something to do about it. In Accounting Practice Management, the standard for this is remaining budget against actual time. When a job turns red, the conversation should happen that week, not at WIP wash-up after the invoice has gone out. The retrospective conversation is better than nothing. The proactive one is better still.

Write-offs don't disappear by avoiding the conversation. They disappear when the right question gets asked of the right person at the right time.