Solution Properties
Solution ID:
200427112158150
Last Modified Date:
Mon Oct 19 14:51:09 UTC 2026
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
How to write off customer invoices to bad debt - VAT Cash Accounting
Description

Occasionally you may have customers who are unable to pay their invoices, for example, due to liquidation, insolvency or dispute. You can set these invoices against your current year's profits as a bad debt write off. As you're on VAT Cash Accounting, you can't use the Write Off, Refunds and Returns Wizard. You must therefore process them manually.

NOTE:

This article only applies if you're using the VAT Cash Accounting scheme. If you're using the Standard VAT scheme, refer to this guide.

Cause
Resolution

The following steps contain everything you need to help you write off customer invoices to bad debt.

Create a Bad Debt Write Off nominal code

The Sage default nominal structure includes nominal code 8100 for Bad Debt Write Off. If you've deleted it or use your own nominal structure, create a Bad Debt Write Off code before you continue.

  1. Select Nominal codes then choose New or New/edit.
  2. Complete the Nominal Record as follows:

    N/C
    Enter a nominal code within the overheads section of your profit and loss. If you use the Sage default nominal structure, choose a code between 8100 and 8199.
    Name Enter the name for the new nominal record, for example Bad Debt Write Off.
  3. Press Save then press Close.
Check your Chart of Accounts to make sure the new nominal code is in the overheads section of your profit and loss report.

 

Write off a sales invoice

In the following example, you invoiced Brown Ltd for 120.00 inc VAT at 20%. The debt has remained unpaid and is to be written off.

  1. Select Customers then choose Batch credit.
  2. Complete the Batch Customer Credit window as follows: The tax code, net, and VAT amounts must be the same as the invoice being written off.

TIP:

If the invoice you're writing off has multiple VAT rates, you should split the transaction using one line for each VAT rate as appropriate.

A/C Date Credit No N/C Details Net T/C VAT
Brown Write off Date BadDbt
8100
 Write Off
100.00
T1
20.00
  1. Press Save then press Close.

Now allocate the credit to the invoice to clear the outstanding debt.

If you want to reverse any written off invoices, you can reinstate the invoice by posting an invoice with the same details as the credit note.

 

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