Invoices/Bills - Feature to 'write off' as bad debt
At the moment, you need to raise a credit note to write off a bad debt, which then records the invoice as "paid" which is extremely irksome, and factually incorrect. There needs to be an actual "write off" option so that the debts don't show up constantly in your reports and you can claim a tax deduction for them, but they don't get recorded as paid.
Hi community, we appreciate this idea has collected a fair amount of votes and commentary. This has all been feedback and taken seriously by our product teams.
Currently, there are ways to record a bad debt in Xero, depending on your tax registration status and how you want the transactions to be recorded in your reports - We have help for this on Xero Central you can draw into.
We don’t have any plans in the near term to expand functionality to develop a button to write off invoices or bills as 'bad debt'. If anything changes in this space, we’ll update you on this idea!
Cass Moore commented
You can do a minor adjustment when reconciling - its at the bottom of the page
#3 "The sum of your selected transactions must match the money spent. Make adjustments, as needed." - select "minor adjustment"
Zvi Ellinson commented
Even for writing off a part of a bill (eg where a client paid 1p too little) would be simpler to write off
Hein Kuenen commented
What a shame that Xero, again, decides to ignore important requests that are needed to be fully HMRX/Tax compliant.
A credit note to write off a bad debt is, as far as we know and checked with HMRC, actually the wordt way to do so ....
Louise Allen commented
If the credit note method is the only way to write off a bad debt then surely the system could show the invoice status as "written off" if the account used is Bad Debt rather than Sales. That should not be a difficult thing to implement.and more accurately reflects the status of the invoice and should allow for reports to be developed to show this information.
David Waterfield commented
We know how to do it - but we want it to be easier; Is the invoice older than six months after end of trade credit terms tec etc. I don't think that xero's suggested way of accounting for any bad debt recovery actually agrees with Uk HMRC requirements; I think a bad debt recoveries account may be required; code the cash received to that account and deal with the VAT element accordingly - which I think should be reported in the Sales and Output VAT sections of a VAT Return; the bad debt recoveries account can be netted off the P&L reporting for bad debts; then there is no need to look at reversing bad debt journals.
Deanna Milosev commented
we have had so many of these in the past 2 years during covid and now they are sitting there making my work Harder if only I could write them off and they don't keep popping up on my reports.
Michelle Kneen commented
We have a company in Dubai and it is illegal to raise a credit note for a Bad debt, So we would need an alternative way of doing this.
Renee Allan commented
Xero only interprets credit allocations as cash transactions which is inaccurate when running Cash reports ie P&L as the write off is not cash received - it is quite the contrary. Couldn't Xero recognise the Source - that denotes it as a receivable credit note -write off - and not treat it as Cash