What is write-off rate in accounts receivable?

Write-off rate is calculated by dividing the total amount written off in a period by the total AR generated in that same period. A business that generates $500k in annual AR and writes off $15k has a write-off rate of 3%. Industry benchmarks vary widely — professional services typically run 1–3%, construction can hit 4–8% depending on billing practices, and healthcare often runs higher because of insurance claim complexity.

The write-off rate is a lagging indicator. By the time a balance is written off, the collection window has been closed for months. A more useful exercise is to track write-off rates by aging bucket retroactively: of invoices that reached the 90-plus-day bucket in the last year, what percentage was eventually recovered versus written off? That number tells you where the real inflection point is for your specific book.

Reducing write-off rate is almost always more profitable than cutting operating costs. A single percentage-point improvement on a $1M AR book saves $10k in cash — no new customers required.