You can process any bad debt you want to write off easily on the Write Off Bad Debts screen, however there are some rules apply depending on what invoice you are writing off. You can find those rules in this article.
Note: If you have made a mistake, you can reverse the write off, for more details, please refer to the Reverse Bad Debts Written Off article.
Process bad debts:
Click Debtors then Credit Control and then click Write Off Bad Debts.
Note: The Write Off Bad Debts screen opens listing all relevant transactions. You can narrow down you search using advanced filters. You can also search on the columns directly by pointing the mouse to the name of the column and click on the icon and choose from the available filter list, then click OK.
Select the checkbox or boxes in front of the transactions you wish to process.
Note: You can then use the Select All checkbox at the top of the screen.
Click Process at the bottom of the screen.
A confirmation message is displayed for you with the total value of the transactions selected to confirm if you are happy to progress.
Click Continue.
Note: The Update Bad Debt Written Off screen is displayed.
Type in or select a sales analysis as this is a mandatory field.
Note: The Date and Year and Period fields are disabled and cannot be amended. They will pick up the system date and the year and period fields are adjusted accordingly depending on your posting permissions.
Click Save.
After you have selected to write off sales invoices as bad debt, the system posts and allocates transactions against the sales invoices using the following rules:
If the invoice due date is 6 months or older that the current system date, then the bad debt write off transaction type is a credit note.
If the invoice due date is less than 6 months since the current system date, then the bad debt write off transaction type is a credit adjustment.
One bad debt transaction is created for each transaction that you are writing off.
The transaction are then posted using the following information:
The default transaction description is Bad Debt Written Off which you can view in the Sales Transactions Enquiry for the relevant customer in the Description column.
The Header Ref. column is updated with the next Document Number for Bad Debt Transaction that is taken from the System Options Documents Tab which is security profile permission driven, prefixed with the letters BD.
The system carries out a check to ensure that if a transaction already exists with the next bad debt document number, then the system uses the next available bad debt document number.
When you write off a currency transaction, then the home and currency values posted on the invoice should be the values in home and currency that get posted, so therefore no exchange difference should be generated.
The bad debt transaction uses the original invoice exchange rate whether a credit note, or an adjustment is created.
If the original transaction has the same VAT rate on all detail lines, then irrespective of whether a credit note, or a credit adjustment is posted, a single detail line is posted on the bad debt transaction based on the outstanding values and in the case of a credit note, using the VAT rate from the invoice.
If the original transaction has different VAT rates on each detail line, then a credit note is created, and each different VAT rate detail line is recreated on the credit note.
The values that are copied from the original invoice are the, VAT Code, VAT Value, Gross, and any discounts.
This VAT code is going to take precedence over the VAT code set on the Bad Debt Analysis.
If the original transaction has different VAT rates on each detail line, then when a credit adjustment is created, a single detail line is posted on the bad debt transaction based on the outstanding values.
For more information on how to deal with the VAT on a bad debt which is not older than 6 months, please refer to our How to deal with VAT on bad debt article.