Happy Business Starts Here

How do we handle Bad Debt in zuora

Nigel
Master

How do we handle Bad Debt in zuora

If we make an invoice for a customer and then, despite all efforts, we can't get the money from them.  My finance team say this should go into a Bad Debt accounting code.

 

In Zuora:

Invoice is made  (Credit Revenue, Debit A/R )

We write off the invoice. 

This makes a Credit Memo ( Credit A/R, Debit Revenue )

 

Now what? How do I, or finance, now put that against a Bad Debt accounting code? 

5 REPLIES 5
rjohnson
Guru

Re: How do we handle Bad Debt in zuora

Hello @Nigel, you need to first make sure that you have your bad debt accounting code configured in Zuora.  When I attempt to write off an invoice I do the following:

  1. Open the invoice
  2. Create invoice adjustment
  3. Change the reason code to Write Off 
  4. Change the Accounting Code to Bad Debt
  5. Enter the amount you are writing off
  6. Create invoice adjustment

Please let me know if you have any other questions.

 

Randi

Nigel
Master

Re: How do we handle Bad Debt in zuora

@rjohnson I think invoice (item) adjustments are only available if you don't have the advanced AR / invoice setllement features on which we do - so we have to make credit memos instead. I assumed there'd be a way to mark a credit memo to apply to a different accounting code so it would credit that, rather than just credit it back to Account Receivable.

Mayank
Zuora Staff

Re: How do we handle Bad Debt in zuora

Hi

We can create a credit memo against a particular invoice that is supposed to be declared as bad debt. 
 
image.png
Go to Action - >  Edit on the CM lines and change the default account to bad debt account.
 
image.png
 
This should reduce the AR and increase the bad debt account when applied to the invoice.  
 
Please see if this helps.
 
Thanks
Nigel
Master

Re: How do we handle Bad Debt in zuora

Sorry - hadn't seen this reply (some how wasn't subscribed to the topic).

 

In order to edit the accounting code, we have to make the credit memo manually right?  On an invoice there is a "write-off" functionality, but all that does is reverse the invoice and not update the charge through date so it's not re-invoiced on a bill run.   Calling this "write-off" sounds wrong as there's no option in that to show this as a bad debt.

 

One alternative suggested was to use an external payment, with "bad debt" as the bank account on that which almost seems simpler for the same effect.

Eva
Zuora Support
Zuora Support

Re: How do we handle Bad Debt in zuora

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)


If you found my answer helpful, please give me a kudo ↑
Help others find answers faster by accepting my post as a solution √