SAM by Auxo

This article describes how you can identify bad debtors then write off outstanding balances that you do not expect to recover. If you later receive payment for a written off debt you can then write back this amount and process the receipt

You should check with your accountant to ensure you are following correct processes in identifying and dealing with bad debts.

Be prepared!  Your accountant will most likely ask about bad debts when preparing financial reports/tax returns - so keep a note/paperwork about bad debts written off or written back

Identify bad debts

Identify the bad debt – you may already know the details but you can also run these reports to identify bad debts:

There are two reports that can be used:

Debtors Credit Management Report

• Accounts > Reports > Debtors > Debtors Credit Management Report - select "90 Days+" in "Print Ageing" and "Extended Ageing"
  
  This is a good on screen report - you can drill down to the transactions - in the "Ageing" area of the report - double click on the figures to display Current Debtor Postings
  Then double click on a posting to display the invoice
  

Debtors Aged Trial Balance

• Accounts > Debtors > Debtors Aged Trial Balance - tick "90 Days+" in "Print Ageing"
  This report is in pdf format but has an option to "Create MS Excel File" and can also be run as "Detailed"

Write Off bad debts

Once you have identified the bad debt that you need to write off then go to that debtor and select Journal,

In this example we need to write off a bad debt for CHAPLIN/C - he keeps on escaping:

1. Select the appropriate date
2. Type of Journal is AD- which will enter a credit amount on the account
3. Enter in an appropriate reference
4. GL Code – select the appropriate expense account (GL code)

Please phone if you need help to set up a GL code.
5. Check with your accountant to clarify if GST is applicable to this transaction
6. This amount is the total you are writing off
7. Enter a relevant comment that will help you identify the transaction in the future

Click OK and the journal will display on the customer’s account.

Credit match the transactions –

The balances in the top right are now zero and nothing is outstanding on the debtor account.

If a Bad Debt is later fully or partially paid

If a written off bad debt is later fully or partially paid then this is how you can process it in Orion:

For this example – an invoice for $148.21 was written off some years ago and the customer is now paying $100 toward the invoice:

As above go to Debtors and find the customer then click Journal:

1. Select the appropriate date
2. Type of Journal is AD+ which will enter a debit amount on the account
3. Enter in an appropriate reference
4. GL Code – select the appropriate expense account (GL code)

Please phone us for help on how to set up a GL code.
5. Check with your accountant to clarify if GST is applicable to this transaction
6. This amount is the total amount that has been recovered/now being paid
7. Enter a relevant comment that will help you identify the transaction in the future

Click OK and the journal will now display on the account – note the debtor balances in the top right and Balance on the account

Now process the receipt using the relevant Payment Type and credit match

Balances are now zero: