Follow these steps to write off customer invoices to bad debt manually.
Create a Bad Debt Write Off nominal code
When using Sage's default nominal structure, you'll have a Bad Debt Write Off nominal code 8100. If you've deleted this account, or created a different nominal structure, create one before proceeding.
- Go to Nominal codes then select New/edit.
- Complete the Nominal Record as required, for example:
N/C | Enter the nominal code number to use for bad debt write-off. NOTE: This code is to be within the overheads section of the profit and loss. The range is 8100 - 8199 in the default chart of accounts. |
Name | Enter the name of the account, for example, Bad Debt Write Off. |
- Select Save then Close.
Write off a sales invoice
In the following example, the customer invoice is 120.00, including VAT at 20%. The debt is unpaid and you can write it off.
- Go to Customers then select Batch credit.
- Enter the details on the Batch Customer Credits window, for example:
A/C | Date | Credit No | N/C | Details | Net | T/C | VAT |
BROWN | Write-Off Date | BADDBT | 8100 | Write-Off | 120.00 | T9 | 0.00 |
- Select Save then Close.
TIP: Adjust an invoice posted against a project by posting a project only charge for the net amount.
Once the write off is complete, you can allocate the credit to the invoice to clear the outstanding debt.
Reclaim VAT if you qualify for Bad Debt Relief later
In the following example, the invoice is 120.00, including VAT at 20%. The write off was 30 June so the transaction qualifies for Bad Debt Relief from 31 December.
- Go to Nominal codes then select Journal entry.
- Enter a date and reference for the journal, then enter the VAT reclaim information, for example:
N/C | Name | Details | T/C | Debit | Credit |
2201 | Purchase Tax Control Account | Bad Debt Relief | T1 | 20.00 | 0.00 |
8100 | Bad Debt Write Off | Bad Debt Relief | T9 | 0.00 | 20.00 |
The journal date must be after the six-month period to satisfy HMRC rules, as explained in the Bad Debt Relief Conditions section.
- Click Save then click Close.
You've now posted the journal to reclaim the VAT, updating box 4 of the VAT return for the period as required by HMRC.
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