The accounting of write-offs
A couple of weeks ago I was discussing with Lynn, a good friend of mine. We met at a Big 4 many years ago and have kept in touch despite the distance. While our conversations tend to be mostly about family, common friends, professional development, and opportunities, we always end up discussing accounting. Inevitably, I always ask her that question:
Me: "What are you doing with your receivables? Have you collected anything?"
Lynn: "Nope"
Me: "Nothing at all? It’s been two years. What about the letter you sent last February?"
Lynn: "Well, no answers. She sighed, obviously annoyed about me digging."
Me (I like being annoying): "You will never collect it. Your auditors are coming soon. How will you explain this?"
Lynn: "We might get it before the end of the year."
Me: "It has been two years. They are bankrupt! WRITE IT OFF!"
Lynn: "We just can’t afford more expenses. This income statement is already too heavy."
Me: "You are carrying fake assets… WRITE IT OFF!"
The day after, Jordyn announced that she would stop her gymnastics training to focus more on soccer. Six years of gymnastics training including 3 years of gymnastics summer camp, many weekends spent at gymnastics meets, annoying small talks with other parents, waking up early on Sunday mornings, bad foods, and WRITE-OFF.
What is a write-off? From my new AI BFF, Chat GPT, " a write-off is a way for individuals and businesses to reduce their taxable income by deducting certain expenses or losses from their total revenue. It is a financial maneuver that can help keep more of your hard-earned money in your pocket come tax time”.
I am not a tax accountant and even though I always look for all possible and allowable deductions, accounting write-offs (not tax write-offs) are traumatic. I do not like losing my hard-earned money (or time, or affections, or attention, or mental space). In the accounting world, a write-off is decreasing the value of an asset (impairment) or removing an asset from a company’s balance sheet (full write-off). Assets that are considered to have no future economic value or uncollectible bad debts are written off.
A write-off is always painful in my balanced sheets. It is getting rid of an asset, an investment that I thought would have carried significant return in the future like writing off this crypto folly that was supposed to go to the moon. It is me leaving our house in Haiti and never wanting to return. It is my dad knowing that he will never feel secure in his paradise.
A write-off is leaving behind relationships that never paid off, it is giving so much, investing so much and always being taken for granted and not getting anything in return. Write-offs are traumatic when the assets were valuable, they were material.
A write-off is cleaning my closet and donating these designer dresses that never fit, will never fit, and that somehow I still dream of wearing. Every piece of clothing is marked with history, tinted with the hope of an impression, a mood, or a desire to show or not show. And for the clothes I never wear, the annoyance is exacerbated by the thought that I am giving up on the possibility of what could be, how I could look, and how I could feel. I had hope; I envisioned joy, and letting them, writing them off, is letting go of that hope and perceived future joy.
A write-off is Jordyn giving up on her dream to be Simone Biles… it is making space… it is Jordyn asking if we can get soccer tickets to see Messi now that he is in the U.S.
Write-offs are messy. The accounting of write-offs is the accounting of false hopes, the accounting of broken promises, and letting go. It is also the accounting of making space and new possibilities.
I tried on the designer dresses one last time, and cringed at the results of motherhood. I added the dresses to my consignment bag (not donating them when I can sell them). I ensured that all of them were listed for the consignment store with an estimated value; this is an impairment to their net realizable value. I added Jordyn’s leotards to the donation bag, all of these sparkly competition leotards, the camp ones, her baby ones that I could never let go. Full write-off.
Write-offs are about making space... making space for what is to come. Creating space for better inventory. Making space in my closet for all the new graphic sweaters that reflect the “me now.” Getting rid of shit allows you to make space for valuable assets, valid inventory, and goods that will enable you to grow and create more assets, more equity, and more opportunities.
Write-offs don't only focus on what's discarded but also on what remains – the "good assets." It's an opportunity to reassess, revamp, and start anew. Sometimes, in the process, I rediscover clothes I'd forgotten about, leading to a renewed interest in updating my daily attire.
Write-offs are also cathartic. They are inevitable.
Lynn called me a couple of days ago while I was finishing laundry and folding the girls’ clothes. She just returned from her mother’s funeral in her homeland. Her father had passed away a couple of months ago right after Lynn announced her divorce. After more than fifteen years of marriage, after two moves to different countries, after two daughters, successes and failures, she wrote off a relationship that had run its course.
We talked about the funeral, the kids’ new sports, and of course work.
She said "You were right. I got my team to call that company that owed us so much. They didn’t pick up, their phone was disconnected. I just couldn’t write this receivable off. It was my remnant of hope, I wrote off so many things this year. I gave up on so many things, memories, people. And I was written off too. Somehow, this number in my balance sheet kept me hoping, I thought maybe… you never know. It haunted me, but I did it. It is gone, I wrote it off for my August month-end close and feel relieved. I don’t have to worry about it anymore and I can focus on something else.
"Yes", I said. "Congratulations"! And, I folded Jordyn’s new jersey.
#write-off #thebalancedsheets #cpa #accounting
