Write-Off of Uncollectible Receivables or Bad Debts

Write-Off of Uncollectible Receivables or Bad Debts

Identify the Unpaid Invoice

• Navigate to Sales Mgt, Inquiries, Customer Transaction Inquiry
• Search and locate the customer invoice that is confirmed to be uncollectible. (This is only "for info" to verify which invoice is affected).

Ensure you have a GL code for Bad Debts

• Check if a "Bad Debts" account code has been created. If not, please create one. Navigate to Finance Mgt, Maintenance, GL Chart of Accounts.
• Verify that the Bad Debts Expense account exists under GL → Chart of Accounts.

Enter a Credit Note to Write Off the Amount

1. Go to Sales Mgt, Transactions, Issue Customer Credit Notes.
2. Select the customer associated with the unpaid invoice.
3. Choose Credit against invoice and select the invoice to be written off.
4. In the item line:
   • Use a non-stock item such as BADDEBT.
   • Enter the same amount as the unpaid balance.
   • Ensure the GL account is set to your Bad Debts Expense account.
5. Submit the credit note.

Allocate the Credit Note to the Invoice

1. Navigate to Sales → Customer Allocations.
2. Select the customer.
3. Allocate the newly created credit note against the original unpaid invoice to clear the outstanding balance.

Add an Audit Comment (Optional)

• You may add a comment to either the invoice or credit note for audit purposes. Example: "Bad debt write-off approved on 10 June 2025 by [Your Name]."

Accounting Impact

Upon posting the credit note, the system will generate a journal entry as follows:

• Debit: Bad Debts Expense
• Credit: Accounts Receivable (Customer)

This ensures that the customer’s receivable balance is cleared, and the expense is reflected in the profit and loss statement.