Tips

Sage 50 Accounts

Writing Off Customer Bad Debts

Sometimes you might need to write off outstanding transactions on a customer’s account, for example if they cease trading.  If this happens, the total balance on their account is transferred to a Bad Debt Write Off nominal code, this changes the debtors figure on the Balance Sheet report, and the amount written off is set against this year’s profit and loss as an overhead.

To create a Bad Debt Write Off nominal code

If you are using the Sage default nominal code structure you will already have a nominal code for Bad Debt Write Off, 8100 by default.  If you have deleted this account, or created you own nominal structure and have not created a Bad Debt Write Off nominal code, you will need to create one before proceeding.

1. Nominal codes > New/edit
2. Enter the number you want to use for the Bad Debt Write Off nominal code, for example, 8100.

Note: this should be within the Overhead section of the Profit and Loss report.

1. Enter the name of the account, for example, Bad Debt Write Off.

2 Save > Close.

Writing off a bad debt

We will firstly assume that the customer has a positive balance, therefore we need to post a credit note.

1. Customers > Batch credit
2. Enter the relevant customer information.
3. A/C – Customer A/c code
4. Date – Date of write off.
5. Credit No. – Bad Debt
6. N/C – 8100
7. Details – Bad Debt Write Off
8. Net – Net amount of bad debt (if you do not know the net amount enter the gross amount and click F9 to calculate the Net amount.
9. T/C – T1
10. VAT – check the Vat has been calculated correctly or type in the correct VAT figure.
11. Save >

If the customer has overpaid i.e. the customer has a negative balance, therefore we need to post a sales invoice.

1. Customers > Batch invoice
2. Enter the relevant customer information.
3. A/C – Customer A/c code
4. Date – Date of write off.
5. Ref – Bad Debt
6. N/C – 8100
7. Details – Bad Debt Write Off
8. Net – enter the amount of the overpayment to be written off.
9. T/C – T9
10. Save > Close.

You have now posted the invoice to write off the debt.

You now need to allocate all the outstanding transactions on the customer’s account.

1. Customers > Customer receipt
2. Select the relevant customer.
3. Enter the relevant date you want to allocate the bad debt write off.
4. Allocate the invoices/credit notes/Sales on account against each other as required.

If you would help writing off customer bad debts or customer over payments or need any other help with your Sage 50 Accounts, please contact us