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Write-Off

Accounting Support

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.

AR collection tools in JustOn

The following table lists tools for collecting overdue receivables. To actively trigger timely payments, by contrast, you can use JustOn's payment collection or SEPA export.

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) As the dunning levels escalate, you may involve a debt collection agency to handle the collection on your behalf.

(3) If the invoice remains unpaid and becomes more overdue, you may consider applying individual value adjustments in parallel in order to devalue the corresponding receivable.

(4) 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.

collection_escalation
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 supports these scenarios with balances of the type Write off that 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 manually. Doing so creates a balance of the type Write off, which is immediately assigned to the current invoice. By default, JustOn sets the current open amount of the invoice as the balance amount. You can, however, modify this value.

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 field Write-Off Reason. The following values are available by default:

Value Description
Missing amount below threshold Set when automatically creating write-off balance on payment registration.
Invoice below threshold Set when automatically creating a write-off balance on invoice finalization.
Manual write-off Default value when manually 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 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.
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.
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 the some specifics when payment balances come into play in these contexts:

  • Invoice below threshold

    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.

  • 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.

Info

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.

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.