Write-Off vs Recover Calculator

How to read the result

The write-off scenario gives you a tax deduction, but nothing else — you receive zero cash. The net benefit is the tax saving (debt × your marginal tax rate). The calculator then shows how much new revenue you'd need to generate, at your gross margin, to replace the full loss.

The recovery scenario assumes Merion recovers 60% of the debt (an indicative industry average across all account ages) and charges 20% commission on that amount. You receive the balance in cash. The "revenue needed to replace" figure shows the gap between what you'd receive and the face value of the debt — again, expressed as the revenue you'd need to earn to close that gap.

In most scenarios, recovery produces a better financial outcome than write-off — especially for businesses with slim margins.

Why recovery almost always wins

A tax deduction for a bad debt gives you back a percentage of the loss (your tax rate on the debt value). Recovery, even at a reduced rate after commission, typically returns several times more. The only scenario where write-off clearly wins is when recovery costs are high and the likelihood of success is very low — which is why Merion's commission-only model matters. If we can't collect, you owe us nothing.

The "revenue to replace" figures are often the most confronting. A business with a 20% gross margin needs to generate five dollars of revenue to cover every dollar of loss. Writing off a $10,000 debt means you need to find $50,000 in new sales to replace it — after the tax saving, still $35,000. That's a lot of sales calls.

See also: Net recovery estimator — your exact take-home after commission; Recovery ROI calculator — the full cost-benefit of referring this debt.

This is an indicative estimate for illustration only — not financial, tax or legal advice. Recovery rate of 60% and commission of 20% are averages; actual results vary. Consult your accountant before writing off a debt for tax purposes.