How to Raise a Bad Debt Credit

Sometimes you may need to write off an amount owed by a customer, for example, when a customer does not pay an outstanding debt. In Simpro Premium you can apply a credit to an invoice so that it is no longer outstanding.

Learn more about credit notes in How to Raise a Customer Credit Note.

In order to make a bad debt credit distinct from other credit notes you can associate it with a bad debt account. This will ensure that it is not transferred to the same account as the rest of your credits in your accounting package.

The process for handling a bad debt credit varies depending on whether you use an income or expense account for bad debt in your accounting package. Consult your accountant if you are unsure which type of account is being used.

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Create Invoices and Credit Notes

Before performing the steps detailed below, ensure that this part of your build is set up correctly. The relevant steps to set up the features and workflows detailed in this article can be found here:

How to Set up Chart of Accounts

To create a bad debt account:

  1. Go to System > Setup > Accounts > Chart of Accounts.
  2. Click CREATE AN ACCOUNT.
  3. Enter a Name such as Bad Debt.
  4. Under Type select Income.
    • You can only select an Income account for credits in Simpro Premium. You must select Income for a bad debt account even if your accounting package uses an expense account for bad debt.
  5. Enter an Account No.
    • If your accounting package uses an income account for bad debt enter the number or code associated with the bad debt in your chart of accounts from your accounting packages.
    • If your accounting package uses an expense account for bad debt enter Bad debt - Do not transfer.

To create a bad debt credit:

  1. Access the invoice to be written off.
  2. Go to Payments and click Add Credit Note.
  3. Under Account, select the bad debt account.
  4. Click Save and Finish.

In Simpro Premium you can only select an income account for credit notes. However, bad debt is usually considered an expense to your business. In most accounting packages it is typically recorded against an expense account. You cannot export bad debt credits from Simpro Premium to your accounting package if your accounting package uses an expense account for bad debt.

Instead of exporting bad debt credits from Simpro Premium, mark the transaction as exported and handle the bad debt in your accounting package separately using the method suggested by your accountant or in your accounting package’s help documentation. Learn more in Flag transactions as exported.

In Simpro Premium you can only select an income account for credit notes. If you record bad debt against an income account in your accounting package, you can associate your Simpro Premium bad debt account with your bad debt account from your chart of accounts in your accounting package. This will allow you to transfer bad debt credits directly across using the accounting link.

To transfer credits to your accounting link:

  1. Hover over Utilities and click the name of your accounting package.
  2. Under the Transfer tab filter your Transaction Type by Customer Invoices / Credits.
  3. Select the bad debt credits.
  4. Click PROCESS SELECTED.