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Individual Value Adjustment

Accounting Support

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.

Configuring Individual Value Adjustment
Managing Individual Value Adjustment

Understanding IVA

Occasionally, a customer may not have the money to pay an invoice when due, for example, when they have gone into insolvency or liquidation. In this case, your business's outstanding payment becomes unlikely to be collected – your receivable becomes a doubtful receivable or bad debt.

When you recognize a bad debt, you usually devalue the corresponding invoice amount by a certain percentage. This allows for reducing the relevant accounts receivable.

The individual value adjustment is usually a preliminary step to a complete write-off.

IVA Implementation Details

JustOn implements IVA for invoices using specific bookkeeping data.

IVA Bookkeeping Data

To support recording individual value adjustments for invoices, JustOn writes booking details of the type IVA. The IVA booking detail amount is calculated based on the invoice net amount and the configured IVA percentage:

(invoice total net - payment net) * IVA rate

If the invoice includes invoice line items with different tax rates, JustOn uses the lowest given tax rate (except for information invoice line items and invoice line items without tax): It calculates the payment net amount from the sum of all payment balances applying the lowest tax rate of the invoice.

IVA Workflow

In order to use individual value adjustments, you must configure IVA levels. These custom settings determine, among others, the percentage by which to devalue the invoice net amount, the condition to be matched for triggering the process and a grace period. Using multiple IVA levels with an increasing IVA percentage, you can build your individual invoice devaluation chain.

If set up accordingly, JustOn creates IVA booking details either automatically, when the scheduled job IVA Creation Job is executed, or individually for an invoice, when a user triggers the process via the Manage IVA button on the invoice. Using a dedicated collective account setting, you can immediately set the booking account to which allocate the produced IVA booking details.

With respect to the IVA booking detail creation, be aware of the following specifics:

  • JustOn takes existing payments and manual write-off balances into account.
  • If a new IVA level is reached, JustOn reverses the existing IVA booking detail and creates a new IVA booking detail.
  • JustOn writes the IVA percentage of the currently applied IVA level to the field IVA Percentage on the invoice.
  • JustOn adjusts the IVA amount – as represented in an IVA booking detail – every time a user manually sets a new IVA level or with every subsequent execution of the IVA creation job.

Info

The individual value adjustment is usually a preliminary step to a complete write-off. That is, when the IVA percentage has reached a 100%, you will most probably proceed to manually writing off the invoice.

IVA Examples

This example – registering a payment on an invoice with IVA booking details – illustrates the behavior.

Assume the following invoice:

Grand Total Tax Rate Total Net
1160 16 1000

First booking detail with 30% IVA percentage:

IVA Percentage IVA Amount Description
30 -300 Total Net * 30% = 1000 * 0.3 = 300

Second booking detail with 50% IVA percentage reverses the first IVA booking detail and creates a new one:

IVA Percentage IVA Amount Description
50 -300 Initial IVA
+300 Reverse IVA
-500 Total Net * 50% = 1000 * 0.5 = 500

Registering a payment and then recalculating the IVA amount to the current invoice IVA percentage:

Payment (gross) Payment (net) IVA Percentage IVA Amount Description
50 -300 Initial IVA
+300 Reverse initial IVA
-500 Previous IVA
290 250 +500 Reverse previous IVA
-375 (Total Net - Payment Net) * 50% = (1000 - 250) / 2 = 375