Write-Off
← Overdue Receivable Management
Write-off is an accounting procedure for reducing or completely removing the value of an asset or receivable – for example, an uncollectible payment for an invoice.
JustOn Billing & Invoice Management supports writing off invoices using specific balances that count against the invoice balance.
AR collection tools in JustOn
The following table lists tools for collecting overdue receivables using JustOn Billing & Invoice Management. To actively trigger timely payments, by contrast, you can use JustOn Cash Management's bank integration or payment provider integration.
| Tool | Description |
|---|---|
| Account statements | Account statements are reports that show the billings and payments of a given account for a specific time period. Businesses can use them to remind customers of sales that have not yet been paid, without expressly stating an overdue receivable and without starting a dunning process. JustOn implements account statements using specific statements that summarize the account's balances. |
| Dunning statements | Dunning statements officially notify customers of overdue payments. According to the overdue status, these notifications can progress from friendly reminders to firm warning letters. JustOn implements dunning process support based on configurable dunning statements. Using multiple dunning levels, you can build your individual dunning escalation scenario. |
| Debt collection | If the dunning communication remains unfruitful, businesses may turn customers over to debt collection agencies, who usually proceed to take other collection options. To support this option, you can specify the name of a debt collection agency when configuring your dunning levels. When set, JustOn copies the name to the invoice, where it is then available for further custom processing. |
| Individual value adjustment | Individual value adjustment (or IVA) is an accounting procedure for devaluing receivables, for example, outstanding payment requests for invoices. JustOn implements IVA for invoices using specific bookkeeping data. |
| Write-off | Write-off is an accounting procedure for reducing or completely removing the value of an asset or receivable – for example, an uncollectible payment for an invoice. JustOn supports writing off invoices using specific balances that count against the invoice balance. |
To illustrate the options in the context of invoicing, think of the following scenario:
(1) A customer defaults on paying an invoice. You notify them of the overdue payment using account statements or (multi-level) dunning reminders.
(2) If the invoice remains unpaid and becomes more overdue, you may consider applying individual value adjustments in order to devalue the corresponding receivable.
(3) Eventually you realize that the customer is definitely not going to pay – the receivable becomes uncollectible. In this case, you must account for the loss, writing off the open amount.
(4) You may call on a debt collection agency to handle the collection. Usually, doing so also involves an individual value adjustment on your receivable.
Example AR collection scenario
Enabling Automatic Write-Off
Manually Writing Off Invoices
Understanding Write-Off
Generally, a write-off is an accounting procedure for reducing or completely removing the value of an asset or receivable.
To illustrate that in the context of invoicing, think of the following scenario:
(1) A customer defaults on paying an invoice. You notify them of the overdue payment using (multi-level) dunning reminders or account statements.
(2) As the invoice becomes more overdue, you may consider applying individual value adjustments in parallel in order to devalue the corresponding receivable.
(3) Eventually you realize that the customer is definitely not going to pay – the receivable becomes uncollectible. In this case, you must account for the loss, writing off the open amount.
Write-Off Support in JustOn
Some business use cases may require to write off certain invoice amounts. JustOn Billing & Invoice Management supports these scenarios with balances of the type Write-off.
Note
Be aware that writing off invoices, which represent receivables, differs from writing off payment balances, which represent payables. For details on writing off payment balances (collecting the payments), see Payment Balance Collection.
Write-off balances for invoices count against the invoice balance, reducing the open invoice amount under certain conditions.
- If an assigned payment does not exactly match the invoice amount, you can write off the missing amount. Differences to cover may, for example, result from currency conversions upon payment matching. You define the difference that you are ready to accept and offset consequently according to your business requirements. In order to enable the automatic balance write-off after payment, you specify either a (percentage) threshold or an absolute amount in the global settings.
- If your business model allows it, you can write off the complete invoice immediately upon finalization. This may be sensible for invoices with small amounts, which you may consider not worth collecting. To enable the automatic, immediate invoice write-off, you specify an absolute amount in the global settings. The date of the write-off balance will be set to the date of the invoice finalization.
-
You can write off an invoice or credit manually. Doing so creates a balance of the type
Write-off, which is immediately assigned to the current invoice or credit. By default, JustOn sets the current open amount of the invoice or credit as the balance amount. You can, however, modify this value.You can still execute a payout based on written-off credits. Note that in this case, JustOn does not revert the write-off balance.
Once applied accordingly, JustOn reduces the open invoice amount or, if offset completely, sets the invoice status to Paid and the invoice balance to 0.
Write-Off Reason
For tracking purposes, JustOn records a reason in the balance field Write-Off Reason. The following values are available by default:
| Value | Balance Type | Description |
|---|---|---|
Missing amount below threshold |
Write-off | Set when automatically creating a write-off balance for an invoice on payment registration |
Invoice below threshold |
Write-off | Set when automatically creating a write-off balance for an invoice on finalization |
Manual write-off |
Write-off | Default value when manually creating a write-off balance for an invoice |
Payment for written-off invoice |
Payment | Set on received payments for written-off invoices, which are assigned to the account (see Payment and Write Off) |
Statute of limitations |
Write-off | Set when collecting a payment, creating a write-off balance |
Info
The write-off reason is included by the creation of booking data from balances and can be used to configure the relevant collective accounts.
If required by your business, you can modify the reasons for the (manual) balance write-off.
Automatic Write Off
The following global settings control the behavior of the automatic write off:
| Field | Type | Description |
|---|---|---|
| Write-Off Threshold | Percent (13,5) | Defines a percentage for the threshold that triggers the automatic creation of a write-off balance when a payment is registered. |
| Write-Off Cap Amount | Number (13,5) | Defines an amount for the threshold that triggers the automatic creation of a write-off balance when a payment is registered. Requires Write-Off Currency to be set. |
| Finalization Write-Off Amount | Number (13,5) | Defines an amount for the threshold that triggers the automatic creation of a write-off balance when an invoice is finalized. Requires Write-Off Currency to be set. |
| Write-Off Currency | Text (3) | Specifies the ISO code of the currency to be used for a threshold amount. |
Info
For creating write-off balances after payment, you can combine the percentage and the absolute amount. In this case, JustOn limits the calculated threshold to the specified amount.
Creating write-off balances on finalization supports absolute amounts only.
Automatic write-off examples
Creating a write-off balance when receiving a payment:
(1) There is an invoice (and an according balance record) of 119,00.
(2) The customer pays in a different currency, and after converting the payment amount, JustOn registers a payment balance record of -118,00.
(3) With a write-off threshold set to 5% (which covers the difference), JustOn automatically creates a write-off balance record of -1, clearing the remaining amount. The write-off reason is set to Missing amount below threshold
| # | Balance Type | Amount |
|---|---|---|
| 1 | Invoice | 119,00 |
| 2 | Payment | -118,00 |
| 3 | Write-off | -1,00 |
Creating a write-off balance on finalization:
(1) There is an invoice (and an according balance record) of 1,50.
(2) With a finalization write-off amount set to 2, JustOn automatically creates a write-off balance record of -1,50 when the invoice is finalized, which clears the complete amount immediately. The write-off reason is set to Invoice below threshold
| # | Balance Type | Amount |
|---|---|---|
| 1 | Invoice | 1,50 |
| 2 | Write-off | -1,50 |
Payment and Write Off
Be aware of some specifics when payment balances come into play in the following contexts.
Existing Payment Balance on Invoice Finalization
If there is already a payment balance assigned to an invoice on finalization, like a pre-payment or a deposit invoice payment, JustOn applies the workflow for creating a write-off balance upon registering a payment, irrespective of any finalization write-off settings.
Existing Write Off on Payment Registration
The behavior of incoming payments for invoices that are partially or fully written off can be controlled using the global setting Disable Write-Off Reversal on Payment. If set, JustOn assigns payments for written-off invoices to the account and sets the checkbox No Auto Assignment to prevent subsequent automatic assignments.
By default, the setting Disable Write-Off Reversal on Payment is not selected. In this case, the following specifics apply when registering a payment with existing write-off balances:
-
Missing amount below threshold
When registering a payment, the write-off amount is adjusted according to the new total payment amount.
-
Manual write-off
When registering a payment, manual write-off balances are removed if necessary to avoid overpayment. Write-off balances with the same write-off reason are removed together, beginning with the latest manual write-off.
Existing write-off balances are never deleted or modified. If the write-off amount has to be adjusted, JustOn creates reverse write-off balances and, if required, a new write-off balance with the modified amount.
Your business may require to never touch written-off invoices again. To this end, you can select the option Disable Write-Off Reversal on Payment.
In this case, any received payments will not be not assigned to the invoice but to the account. In addition, the following specifics apply:
- If the invoice is only partially written off, JustOn splits the payment and assigns the open amount to the invoice.
- The checkbox
No Auto Assignmentis set to prevent subsequent automatic assignments. - The balance field
Write-Off Reasonis set toPayment for written-off invoice. This allows to use collective accounts for assigning a specific account number to these payments when creating bookkeeping data from balances.
Booking Write-Off Balances
The write-off amount is always a gross value. You can control, however, how JustOn creates the corresponding booking details.
If you create booking details for balances and net booking is enabled (the global setting Enable Accounting in Gross Values is not selected), JustOn produces two booking details – one for the write-off net value and one for the corresponding tax. The tax rate and amount is set when creating the write-off balance. With gross booking, JustOn creates one booking detail for the write-off gross value.
When creating the write-off balance, users can manually control the booking detail creation, overruling the global setting. Using the checkbox Calculate Tax (selected by default), JustOn calculates taxes on the current amount, which will produce net and tax booking details. If users deselect the checkbox, JustOn will not calculate taxes, not set the tax rate and amount on the write-off balance, and consequently produce one gross booking detail.
If the invoice includes invoice line items with different tax rates, JustOn uses the lowest given tax rate on booking detail creation: It copies the tax values (tax rate, tax code, applied tax rule) of the invoice line item with the lowest tax rate to the corresponding fields of the write-off balance. When creating booking details, these values are used as input for the tax calculation and for the collective account matching. Invoice line items that are not of the type Product or have a tax rate of 0 are ignored.
Using a dedicated collective account setting, you can immediately set the booking account to which allocate the produced write-off booking details.