Even thriving businesses may not succeed if they run into difficulties managing cash flow.

This blog may assist AR manager to calculate accruals on debts which poses risk not to recover and at the end, write-off bad debts, while fitting with legal requirements using Bad debts management and AR Write-offs introduced in 2021 R2 (12.0.26)

Bad debts management (BADBTGEN) automate the manual process and therefore, limit risks of mistakes, accelerate the financial process.

This new function contain option that enables to indicate which bad debt management step is going to be processed, as well as the kind of posting action:

• Doubtful receivables (Post/Reverse)
• Impairment (Post/Reverse)
• Direct write-off (Post)

Prerequisites

New activity code

BADBT 'Bad debt management' (Active), Module = Financials, Type = Functional Dependency=No

New Parameter

CPT chapter, CLO group

The automatic journal used for posting is determined by the following parameter.

1. GAUBDTDOU – Bad debts – Doubtful debts
2. GAUBDTIPR – Bad debts - Impairment
3. GAUBDTDWO - Bad debts - Write-off

Setup

Bad debt terms (GESBDT)

This function is responsible for management the terms of Bad debts protected by BADBT activity code and it will be in Common data / BP tables. 

Setting up Bad debt terms code "BDTRM" for these days’ interval with percentage calculations.

Formulas per legislation (GESTFOLEG)

For the 3 automatic Journals (GAUBDTDOU, GAUBDTDWO, GAUBDTIPR) verify / setup appropriate legislation formula.

For instance, I will be using AUS legislation so making sure I have my formula setup accordingly.

Accounting Codes (GESCAC)

Verify / setup appropriate general ledger accounts for Customer impairments, Impairment expenses and Customer write-offs.

Workflow:

 BP Situation:

For demonstration of Provision, Impairment and Write-off, I have customer ‘AU012’ with 3 Invoice of $1100 each ($1000 + tax 100)

For Sales Invoice

• SIN2201AU01200026 - we will post Provision.
• SIN2201AU01200027 - we will post Impairment.
• SIN2201AU01200028 – We have received $800 and balance $300 we will Write-off.

Doubtful receivables

In function Bad debts management (BADBTGEN) we will select management rule as “Doubtful receivables”, our customer and terms to generate the list of invoices we want to post as provision.

In Bad debt selection windows, we will select our invoice SIN2201AU01200026 to create provision.

Provisional Journal entry generated from function Bad debts management (BADBTGE)

Impairment

In function Bad debts management (BADBTGEN) we will select management rule as “Impairment”, our customer, and terms to generate the list of invoices we want to post as Impairment.

In Bad debt selection windows, we will select our invoice SIN2201AU01200027 to create Impairment.

Note:

Since we can modify Percentage, I have increased impairment from 50% to 75%

Impairment Journal entry generated from function Bad debts management (BADBTGEN)

BAD Debt write-offs

In function Bad debts management (BADBTGEN) we will select management rule as “Write-offs and doubtful receivables” and our customer to generate the list of invoices we want to post as Bad debts write-offs.

In Bad debt selection windows, we will select our invoice SIN2201AU01200028 to create bad debt write-offs.

Bad Debts write-offs Journal entry generated from function Bad debts management (BADBTGEN)