Write Off Segmentation
When you write off non-collectable debt, you transfer the receivable from a "normal" service agreement onto one or more write-off service agreements. When the debt is transferred to a write-off service agreement, the distribution code on the "normal" service agreement is credited (typically an A/R GL account), and the distribution code on the write-off service agreement is debited.
You will almost always need a write-off service agreement whose distribution code is the write-off expense. However, you probably don't book all of the write-off amount to a write-off expense account. Why? Because the debt that you're writing off typically contains both revenue and liabilities. At write-off time, you want to book the written off revenue to a write-off expense account and you want to reduce the liabilities (you don't owe the liability if you don't get paid). This means you'll need another SA type for the liabilities. Refer to The Ramifications of Write Offs in the General Ledger for a complete explanation.
The following table contains the minimum number of SA Types that you'll need to hold your write-offs.
|
CIS Division/ SA Type |
Service Type |
Distrib. Code |
Bill Seg Type |
Debt Class |
Pay Seg Type |
Do Not Overpay |
|
CA/WO-STD |
Other |
EXP-W/O |
Not billed |
WO |
Normal |
Yes |
|
CA/WO-LIA |
Other |
LIA-General |
Not billed |
WO |
Normal |
Yes |
Notice the following about the new write-off SA types:
- They have interesting distribution codes. This is because when debt is transferred to these types of service agreements, the system must debit either an expense account (i.e., write-off expense) or a liability account. It's important to note that in The Ramifications of Write Offs in the General Ledger we explain how this liability account may be overwritten with the liability account that was originally booked.
- Neither needs a bill segment type because the system never creates bill segments for such service agreements (they exist only to hold uncollectable debt)
- Even though the debt is not collectable, it still has a debt class. Why? Because the system shows a customer's debt on many inquiries by debt class and it's important to show write-off debt on these queries.
- The combination of Payment Segment Type and Do Not Overpay are important. Refer to The Ramifications of Write Offs in the General Ledger for a complete explanation.
The adjustment type used to set the offending service agreement's current balance equal to its payoff balance is defined on each write-offable SA type. The adjustment type used to transfer the delinquent debt to the write-off service agreement is defined on the write-off SA type.
An Alternative. If you have a limited number of liability accounts, you may decide to have a separate write-off service agreement for each liability account. Doing this would proliferate the number of service agreements created at write-off time. However, it would simplify the remittance of payment to the taxing authority if the reversed liability is ever paid.