When it is decided that an overdue account cannot be collected through regular collection methods (i.e. letter writing and phone calls), the overdue invoices can be submitted to a collection agency or legal firm to collect on your behalf for a fee. At this time, the invoices should be written off and expensed on the books as a bad debt.
These invoices can be tracked through the Bad Debts and Collections programs, and if a recovery of a bad debt should occur, any money received can be recorded. By writing off the account at this time, the account will cease to appear on your Aged Accounts Receivable Reports.
If desired, separate G/L Accounts can be assigned to each of the Bad Debts default accounts, or the same G/L Account can be used (i.e. assign Bad Debts expense account to Bad Debts Expense, Recovery, Collection and Legal Fees default accounts).
The prompts to enter a Bad Debt include:
Existing Write-Off Search:
In Change mode a window is provide on this field to view and select
from existing Bad Debt Records for this customer displaying the
date, Write-Off Invoice # and the amount.
Note: Any changes made to Bad Debt records that are already posted
will not be saved.
Some firms write off the entire customer account at once, in
which case the invoice W/OFF will suffice.
Other firms prefer to write off each invoice separately on the
customer's account so a specific number can be entered.
Check with your company policy on this matter.
Division Posting in the General Ledger:
The Activate G/L Posting By Division feature can be
activated in the Support Application
Parameters, so that the posted Bad Debt transactions
reflect the corresponding invoice divisions in the G/L.
The Division cannot be changed in Change mode, so if a correction is required delete the Bad Debt record and re-enter it.
Posting by Division:
When multiple invoices are written-off as part of the same Bad
Debt transaction, one write-off invoice is created per
division.
The write-off invoice number in the Customer
Account Inquiry is prefaced by the corresponding division.
The posted Gross Amount for the Bad Debt will be the accumulated
outstanding invoice total for each division.
Taxes, Finance Charges, Net Amount, Amt Collected, and Collection
Costs will be totalled proportionally by division based on the
source invoice amount.
Any rounding values will post to blank division.
Note: When a Bad Debt is comprised of invoices from multiple divisions, the Divisional breakdown does not show on the Bad Debts posting report, but can be reviewed in the G/L postings in G/L Inquiry by Transaction #.
Note: By using separate batches, Invoice entry and posting is NOT locked for other batch codes.
Currency Exchange:
If the currency assigned here has a currency exchange rate in
Currency Codes, and the exchange posting
processing has been activated from Support
Application Parameters, G/L posting transactions will be
generated for the amount of the exchange on only the finance
charges and the bad debts portions of the write off.
The currency Exchange account is credited and the Finance Charge or
Bad debts account is debited as defined in the G/L Default Accounts.
If the Divisional Posting feature has been activated in the Support Application Parameters this dollar amount reflects the outstanding total of the invoices selected to write-off, and cannot be modified.
If your firm uses the Tax Activity Report to calculate BAS (Business Activity Statement) the standard Taxes written-off and collected in the Bad Debts and Collections are always included in the Tax Activity Report.
Enhanced Taxing:
Select a tax code from the drop-down
list.
Operator role permission to change the Tax Code is not
respected on this field with Enhanced taxing as there is no default
displayed for the customer.
The Standard Industry Code is a code given to a sector of
business by the Collection Companies.
It allows the Collection Agencies to make comparisons between
similar businesses, in terms of bad debts and collection
statistics.
This coding is commonly used in the United States.
Click NO if a Bad Account transaction is not required.
Click YES to generate a Bad Account record to the Bad Account Listing file.
Bad Debt Example:
Ace Contracting owes $673.30 and is
a Bad Debt. Follow these steps:
Total Account Balance $673.30 Ace Contracting won't pay Gross Write-off Amt $673.30 Write-off whole account balance Less Tax 1 Amount $40.00 How much Tax 1 to claim back Less Tax 2 Amount $47.50 How much Tax 2 to claim back Less Finance Charges $15.80 Reverses unpaid Finance Charges ---------- Net Write-off Amount $570.00 The final amount posted to Bad Debt Expense
Posting the Bad Debt Transaction:
Posting the Bad
Debt using Posts Bad Debts results in a
credit invoice appearing on the customer's account, which causes
the customer's account balance to be zero.
Clearing the Customer Account:
To clear the customer's account, apply the credit invoice W/OFF
against the other invoices and finance charges, or use the Clear Unapplied Balances to automatically
cross-apply the credits to clear the account.
The Clear Unapplied Balances action is
disabled if the Reward Dollars feature has been activated,
and the W/OFF credit invoice must then be applied manually using a
"zero-dollar" payment in Customer Payments
to clear the original invoices.
Any Pending Reward Dollars earned by written-off invoices
will automatically be expired when they are paid by the W/OFF
credit invoice.
Note: The security by division feature as determined by Divisional Restricted Views does NOT apply
to the Bad Debts and Collections utilities, but it does apply to
the Bad Account Listing programs.
i.e. An Operator can only add a customer for which he has
divisional access, to the Bad Account List.
ACTIONS:
Additional actions provided by buttons on
the Bad Debts screen include:
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