How To: Write Off Bad Debts

This is a suggestion only.
We recommend you confirm this process with your accountants to make sure they are happy with the effect on your accounts.

There are two options for writing off bad debts:

1. Using Under/Over Payments - recommended method
2. Using a Credit Note

To make sure you use the method that suits your business, please use your Test system to try this out before entering it in your Live system.

Using Under/Over Payments

This method will never remove the invoice, but it will balance it out by creating a credit and remove the invoice from the statement screen.

1. Open a Customer screen (show me how).
2. Find and load the Customer.
3. Open the [ Customer | Detail | Statement ] tab.
4. Select the bad line debt in the Transactions grid (on the left-hand side of the screen) .
5. Right click and select 'Create Allocation Transaction (Under and Over Payments)'.
6. In the dialog:
   1. Acknowledge that you wish to create an under/over payment transaction.
   2. Acknowledge the warning, if there is one. This will appear if the value is over 10% of the total value.
   3. Select the bad debt nominal that you have previously created.
   4. Enter the date to be used.
   5. Tick whether TAX is applicable or not.
   6. Click OK.

Using a Manual Credit Note

Writing off bad debts is carried out in stages:

1. Create a Credit note.
2. Allocate the credit note.
3. Journal the Net Total.

Before you write off a bad debt you may need to Cancel Payment Allocations.

Create a Credit Note

1. Raise a standard Credit Note OR SPLedger Credit Note for the invoice that has not been paid. Typically this would be a copy of the original invoice as a Credit Note, which contained the same stock item(s) as the original. There is a facility in within the [ Sales Order | Other Actions menu ] to 'Copy Sales Order as Credit Note', which may help.
2. The credit note you create would:
   • Debit Sales & VAT.
   • Credit Debtors.

Allocate the Credit Note

1. Open a Customer screen (show me how).
2. Load the required customer record.
3. Click on the [ Statement ] tab.
4. Allocate the Credit Note in the Allocate From grid to the original invoice in the Allocate To grid.

Journal the Net Total

1. Open an Accounts screen (show me how).
2. Open the [ Nominal Accounts | Nominal Accounts ] tab.
3. Now you should journal the "reverse sale amounts" (i.e. the postings made by the credit you have just created to the sales nominal accounts) to a Bad Debt account. Double-click or drag-and-drop the Sales Nominal(s) and the Bad Debt account into the lower grid.
   • Debit Bad Debt.
   • Credit Sales Nominal Account(s).
4. Press Ctrl+S or click to save.

Note: If you don't have a nominal for Bad Debt Write Off you will need to create one with the 'System Type' set to "Expense". This shows in the P&L as an expense.

This is a suggestion only.
We recommend you confirm this process with your accountants to make sure they are happy with the effect on your accounts.

See Also

• Accounts overview