Write Off a Customer’s Bad Debt in Sage 50

This is a step-by-step guide created for users to be able to learn about a customer’s bad debt and how to write off a customer bad debt in Sage 50 accounting.

Generally, when a client fails to pay an invoice due to a disagreement or liquidation, the invoice must be written off. The posting of the credit notes to the bad debt’s nominal ledger account aids in the writing off of the customer’s invoice. Deducts the bad debt from the current fiscal year’s profit. You may be eligible for bad debt relief if you use the standard VAT Scheme.

Usually, users may obtain each Bad Debt of Sage 50 Invoices and also research How to Dispute Sage 50 Invoices when the organization has not gotten any payments. Now, that you are aware of a customer’s bad debt in Sage 50, let us proceed to look at the steps for how one can write off a bad debt.

How to Write Off a Customer Bad Debt in Sage 50

Usually, you can use bad debt relief to recoup VAT that you have already paid to HMRC. The VAT computation is based on the payments you made and received if you use the VAT Cash Accounting system.

The following are the requirements that must be met before you may claim VAT

• You can write off the debt in the general ledger and move it to an individual bad debt account when creating the credit note.
• You have previously accounted for and paid the VAT on the shipments to HMRC.
• The debt has been outstanding for more than six months but is less than four years and six months.

Following are the listed steps, perform them with precision to avoid any unwanted errors.

Step 1: To Write Off the Bad Debt

• As the first Customers & Sales may be found in the Home window’s navigation pane and click on the same.
• Next step, proceed to Select Sales Invoices.
• After the subsequent step, choose the client whose debt will not be paid, in the customer box.
• Thereafter, Enter the original invoice number followed by the letters “WRTOFF” in the Invoice Number area.
• Once the above step is completed, to continue, In the Amount box, enter the amount owed as a negative integer.
• Next, Click the list button in the Account column to display a list of accounts.
• Now, Make sure the All Accounts option is selected.
• After choosing the Bad Debts account, click Select. If your accountant has set up the Allowance for Doubtful Accounts to deal with bad debts, choose this account from the list instead.
• Thereafter, enter the tax code from the original unpaid invoice, in the tax area.
• Next, To validate the transaction, select Display Sales Transaction Detail from the Report menu.
• Finally, Click Process when you’re satisfied with the results.

Step 2: To Offset both Invoices in the Recipients Window

• First and foremost step, In the Home window, on the navigation pane, click Customers & Sales, then Receipts.
• Next, Choose the same client from the list in the Received From box as in the last set of instructions.
• The table displays both the original invoice and the one created according to the first set of instructions.
• Thereafter, click on the Amount Received column, To see both invoice amounts.
• After the subsequent step, to validate the transaction, select Display Receipt Transaction Detail from the Report menu.
• Once the above step is done, The credit and debit balances must be the same.
• Lastly, Click Process when you’re satisfied with the results.

FAQ’s