How Is Debt Financially Written-Off?

Before debt can be written-off, a write-off service agreement must exist for the account. Why? Because when you write-off a normal service agreement's debt, you are actually transferring its debt to a write-off service agreement.

A write-off service agreement is just like other service agreements in that:

  • It holds debt.
  • When a payment is received, the service agreement's debt is reduced.

Debt is transferred to a write-off service agreement (WO SA) from the customer's uncollectable service agreements (SAs). The following points highlight important characteristics about the uncollectable SAs and the WO SA:

  • The WO SA and the uncollectable SAs should be linked to the same account (note: this isn't a strict rule, it just makes sense because an account's written off funds should be linked to the account).
  • Debt may be transferred to a WO SA from any type of service agreement regardless of debt class, i.e., a WO SA can contain debt that originated in any debt class.
  • When you transfer debt from the uncollectable SAs to the WO SA, the debt is removed from the uncollectable SAs (and their status becomes closed - assuming their balance becomes zero).
  • If you use the system's automated write-off processing, the system will create WO SAs for you. The system's automated write-off processing can write-off revenue in a different manner than is used to write-off liabilities. Refer to The Ramifications of Write Offs in the General Ledger for more information.
  • WO SAs are immune from the account debt monitor (assuming their debt class is marked as not being subject to collection activities).
  • WO SAs are not billed (assuming their SA type is marked as being not billable).
  • WO SAs start their life with a non-zero payoff and current balances (i.e., they have debt when first started). This debt is transferred from the normal service agreement(s) whose uncollectable debt necessitated the creation of the WO SA.
  • If the customer pays off the write-off debt, the WO SA remains active in case you ever need to write-off debt in the future. If you don't like the WO SA remaining active after it's paid off, you can indicate on the WO SA's SA Type that it is a "one time charge", this will cause the WO SA to be automatically closed when it's paid off.
  • You can transfer additional uncollectable debt to the WO SA.
Note:

Bankruptcy write-offs. If you have to write-off debt because a customer declares bankruptcy, everything stated above is true. The only thing you have to do is use a different SA type for bankruptcy write-offs as compared to "normal" write-offs. On the bankruptcy write-off SA type, simply leave the payment segment type blank - this way the system will never distribute a payment to the bankrupt debt (because bankrupt debt is legally uncollectable).