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Re: Write Off Invoice seems be to incorrect financial terminology in Zuora?

Nigel
Master

Write Off Invoice seems be to incorrect financial terminology in Zuora?

Hi,

On an posted Invoice there are 2 options under the "more" button - Reverse Invoice and Write Off Invoice (Just for context - we have the Invoice Settlement Feature enabled so these will make credit memos when used).

 

The term "write off" here is really confusing our Finance team as it doesn't actually write off the invoice.

As I understand it:

An invoice item credits Revenue and debits A/R

Reversing an Invoice credits A/R and debits Revenue.

In financial terms, a Write Off  should credit A/R and debit "Bad Debt" or some other code.

However - In Zuora currently, Write off does the same as reverse in terms of the accounting codes.

 

The one difference in zuora is that reverse resets the a charges "charge through date" and write off doesn't - which means in the former a bill run will regenerate the invoice and in the latter it won't.

 

Both are valid use cases, the former where we need to change the name or address (for example) and re-invoice. The latter where it's a mistake and we want to cancel it all off. But for Finance people, these are both called a reversal.

 

A write off is a very different issue, where a customer has not paid. In these cases the Revenue has to be kept on the books, and a Bad Debt code updated instead. 

 

This is very confusing UX issue and I forsee this tripping us up at some point - and especially when we have the auditors in, or new finance starters.  In addition there's no easy way to actually write off an invoice (one has to manually make a credit memo and update the accounting codes, or make "payment" and change the bank account to be "bad debt" to get the double entry to look right.)

 

3 REPLIES 3
Yong
Support SME

Re: Write Off Invoice seems be to incorrect financial terminology in Zuora?

Hi Nigel, 

 

I'm not sure how a Write Off is defined in financial terms, will this document 'How do I handle write-offs?' help explain your concern? https://knowledgecenter.zuora.com/kb/How_do_I_handle_write-offs%3F

 

Nigel
Master

Re: Write Off Invoice seems be to incorrect financial terminology in Zuora?

Hi @Yong  - Thanks for the reply, but that article uses invoice item adjusments whereas we have Credit Memos with advanced AR.  And in that the normal process doesn't actualy "write off" an invoice - it reverses it with no way to mark the accouting code as Bad Debt.  (Yes there are hoops to jump through and make the memo manually - but it's not obvious and the point remains that the term used appears incorrect).

Eva
Zuora Support
Zuora Support

Re: Write Off Invoice seems be to incorrect financial terminology in Zuora?

Hi Nigel, 

 

Currently, we couldn't write off the invoice with the Bad Debt accounting code directly in UI. An existing idea (Writing off invoices (with advanced AR) should have a configurable account code) has been raised in our Community, you can also vote on features and post comments. The Product Management Team actively monitors the community and provides updates on feature requests when available.

Please refer to the below 3 suggestions to update CM's accounting code.

  • Please write off the invoice using PUT_WriteOffInvoice API call with the Bad Debt accounting code. 

Such as:

 "financeInformation":

 {

 "deferredRevenueAccountingCode": "Bad Debt",

 "recognizedRevenueAccountingCode": "Bad Debt"

 }

 

  • Or you can use Mass Updater to override the accounting code for CM. For more details of Mass Updater, please check the instruction in our knowledge center. 

https://knowledgecenter.zuora.com/CC_Finance/Mass_Updater/Update_Accounting_Codes

  • Or, you can create a standalone CM with Draft status first, update the accounting code to Bad Debt. Then apply to the invoice which you want to write off. (Since CM was applied to invoice directly during wring off, we couldn't cancel it to draft)


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