Bad Debt Definition

Bad debt is the accounts receivable that are unlikely to be paid.

Bad Debt Extended Definition
Bad debt may occur when a customer is unable to pay an invoice or when a customer refuses to pay an invoice due to some dispute.

There are federal and state rules about the methods a small business may use to collect an unpaid bill. There are also IRS guidelines about writing off the bad debt when you are no longer trying to collect the bad debt.