How do I write off bad debts?

Summary

This article explains how to write off a bad debt.

More Information

Remember that there are time constraints as to when an invoice can be written off as a bad debt. Under current legislation, if your customer goes bust, you must wait six months before you can claim back any V.A.T. Check the HMRC website or with your accountant for the rules regarding this.

Go to " Accounts\Systems Sales Ledger Invoice/Credit Notes".

• Choose 'Credit Note' from the "Doc Type:" drop down menu.
• The "Date" will default to your System Date, change this to the date on which you wish the debt to be written off.
• Enter the 'Account' code for the customer who has the bad debt. Press <Ctrl+F1> to search for an account code.
• The system will display a screen called "Document To Credit Selection" which will list the outstanding invoices for the account.
  • Select the invoice you wish to "write off" and click [OK]. The system will automatically fill in the "Document:" number for you.
• Click on the "Def. Centre" field. Enter the 'Sales Centre' for 'Bad Debts' and press <Enter>.
  • To search for the centre, press <Ctrl+F1>.

If you do not have a "Bad Debt" centre, you will need to create one. Make sure that it is linked to a nominal code which is created as a 'Profit & Loss - Overhead'. See this article.

• On the "Comment: ", type 'Bad Debt', and press <Enter>.
• Click [Next] to move onto the [Text] tab where you can enter the reason for and amount of the write off.
• In "Product Description:", enter a reason for the "Write off". You may enter text on several lines without entering any prices or quantities.
  • Under "Line Total" - enter the Nett amount of the invoice to be written off. If you enter a V.A.T. Inclusive price, press <F6> to calculate the Nett amount. If you intended to use a previous V.A.T. Rate, make sure the values are at the rate you intended.

Enter all amounts as positive values. As you are creating a Credit Note the system will automatically post the values as negative amounts to the Sales Ledger.

• Click [Next] to move onto the [Summary] tab.
• Check the 'Totals' are correct. If you need to make any changes, click the [Previous] button.
• Click [Print] to print the Credit Note.
• Check the printout. If you need to make any changes, click [Edit] else click [Accept] to save the Credit Note.
• The bad debt will now be written off.

In the unlikely event that you are crediting an invoice produced prior to January 2011, you should check the V.A.T. rate of the invoice prior to posting. Make sure the Credit is posted with the same rate of V.A.T.

In order to use the Vat rate in effect at the time, you must: Press <Alt+V> at the main menu (first screen after you have logged into Platinum) and confirm that you wish to temporarily change your V.A.T. rate to the old rate. Process the credit note at the old V.A.T. rate. Once you have completed the credit note, you must exit from your current option back to a menu as before which will revert the V.A.T. back to the current rate.

See also

• How do I find a customer?
• How do I create a sales or purchase centre?
• How do I create a nominal code?
• How do I allocate a payment to an invoice?
• How do I print an aged debtor or creditor list?
• How do I produce a text invoice in Platinum?

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Keywords AND Misspellings

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