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How to write off customer invoices to bad debt - VAT Cash Accounting

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Summary

Write off customer invoices manually to bad debt - VAT Cash Accounting Scheme

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 to process your bad debt write offs, and therefore must 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, please refer to our help guide.

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

If you're using the Sage default nominal structure you should already have a nominal code for Bad Debt Write Off, 8100 by default. If you've deleted this, or created your own nominal structure and not created a Bad Debt Write Off nominal code, you must create one before proceeding.

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

    N/C Enter the nominal code number you want to create.

    This should be within the overheads section of the profit and loss. If you're using the Sage default nominal structure, the new nominal code will be in the range of 8100 - 8199.
    Name Enter the name for the new nominal record, for example Bad Debt Write Off.
  3. Click Save then click Close.

You should now check your Chart of Accounts to ensure that the nominal code you've created is included within the overheads section of the 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. Click Customers then click 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 are 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. Click Save then click Close.

You should 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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