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Transactions & invoices

Doubtful invoices

How to mark a long-unpaid sales invoice as doubtful in Numera, what changes afterwards and what happens when the client pays later.

Updated

When a sales invoice is long overdue and there are signs the client will not pay it, the invoice is marked as doubtful. Numera moves the unpaid amount of the invoice to expenses. The invoice still stays open: the client still owes the full amount and you can still send them a reminder.

When to mark an invoice as doubtful

Under RTJ 3, receivables have to be assessed at every reporting date. You pick the reason the invoice is unlikely to be paid from a list:

  • The invoice is overdue
  • The debtor is bankrupt or in financial difficulty
  • The debtor has been liquidated
  • The debtor cannot be reached
  • Collection would cost more than the claim
  • The claim is time-barred
  • The claim is in court or enforcement proceedings
  • Other reason

For the annual report, assess receivables as of the last day of the financial year. You can mark a sales invoice in euros that is still unpaid. A credit note cannot be marked.

Marking one invoice

  1. 1

    Open the invoice and choose Mark as doubtful from the ⋯ menu

    A dialog opens that already shows the entry Numera will book.

  2. 2

    Fill in the fields

    • Date – the day of the assessment, today by default. The date must be in an open period and cannot be before the invoice date.
    • Reason – pick one from the list.
    • Note – for example when and how you have tried to collect the debt.
    • Source document – an optional file, for example a bankruptcy notice or your correspondence with the debtor.
  3. 3

    Check the entry

    The dialog shows the entry with the company's own accounts: the debit is the expense account and the credit the doubtful invoices account (4351 and 1208 on the Numera chart of accounts). Amount to expense is the part of the invoice that is unpaid on the chosen date.

  4. 4

    Confirm

    Click Mark as doubtful. The invoice header now shows a grey Doubtful tag instead of the red Overdue tag. Hover over the tag to see the date of the mark and the amount expensed.

Marking several invoices at once

You can mark old debts in one go, for example at the end of the financial year.

  1. 1

    Select the invoices

    In the sales invoice list, select the invoices and click Bulk actions → Mark as doubtful.

  2. 2

    Fill in the fields

    The fields are the same as for one invoice, but instead of a source document there is Board decision, and it is required: one signed decision is the source document for every selected invoice. The reason and the note apply to all of them. Numera also writes each invoice its own justification from its due date and the reminders sent, for example "412 päeva üle tähtaja. 2 meeldetuletust on saadetud." (412 days overdue, 2 reminders sent). This justification is always written in Estonian.

  3. 3

    Check the list

    The dialog shows the invoices that will be marked and the total amount that goes to expenses. The Not marked list shows the invoices that cannot be marked, each with its reason, for example:

    • The invoice is paid
    • Credit note
    • The invoice is not in euros
    • The invoice is already doubtful
    • The date is before the invoice date
    • The claim is over 30 000 €
    • The buyer may be a related person or an employee
  4. 4

    Confirm

    Click Mark N invoices. Each invoice gets its own entry and the Doubtful tag.

What changes after the mark

  • The invoice is still open and the client owes the full amount. You can send a reminder from the invoice page.
  • The invoice no longer appears among the unpaid invoices on the dashboard, in the overdue invoice count or in NumeraAI's Needs attention view. The cash flow forecast leaves it out, and sending reminders in bulk skips it.
  • The sales ledger and the balance sheet still show the invoice, together with the amount expensed.
  • The invoice cannot be edited. If something on the invoice needs fixing, undo the mark first.
  • A receipt that was already on the invoice when it was marked cannot be removed from it. Receipts cannot be reduced by a refund, and a new receipt has to be in euros. If you need to do any of this, undo the mark first.

When the client pays later

Link the receipt to the invoice as usual, see Linking incoming payments. Numera books an entry on the receipt date that reduces the expense by the amount received (debit 1208, credit 4351). The payment is not income: it reduces the expense. When the client pays part of the invoice, the expense goes down by the amount paid and the rest stays in expenses.

When the receipt reached the invoice through an import from other software, the expense stays as it was and the invoice page shows a warning: the invoice is paid, but part of the amount is still in expenses. Click Reassess the claim next to the warning.

Reassessing the claim

When it turns out the claim is likely to be paid after all (for example, the debtor got in touch and promised to pay), choose Reassess the claim from the invoice's ⋯ menu.

Pick a date and add a note if you like. Numera reverses, from that date, whatever is still in expenses. The entries made so far stay, because they were right on their own date. The date must be in an open period and cannot be before the date of the mark or of the latest receipt. After the reassessment the invoice is no longer doubtful.

Undoing the mark

When an invoice was marked by mistake or needs to be edited, choose Undo the doubtful mark from the invoice's ⋯ menu. Numera deletes the expense entries as if the mark had never been made, and the invoice is an ordinary unpaid invoice again.

The mark can be undone only when all its entries are in an open period. When one of them is in a locked period, reassess the claim on a date in an open period instead.

Writing off a hopeless claim

When collecting a claim is wholly unrealistic, the claim is written off as hopeless (RTJ 3 p 31). For example, the debtor's bankruptcy has ended without the claim being paid from the estate, the debtor has been liquidated, or the claim is time-barred. Unlike a doubtful invoice, a written-off claim is no longer on the balance sheet.

  1. 1

    Open the invoice and choose Write off as uncollectible from the ⋯ menu

    Several invoices at once: select them in the sales invoice list and click Bulk actions → Write off as uncollectible.

  2. 2

    Fill in the fields

    The fields are the same as for marking an invoice as doubtful: date, reason, note and source document. For several invoices a Board decision is required instead of the source document, and Numera writes its own reason for each invoice.

  3. 3

    Check the entry

    The credit is the receivables account (1200 "Ostjatelt laekumata arved" on the Numera chart of accounts). The debit depends on whether the invoice was marked as doubtful first:

    • It was marked – debit 1208. The expense was booked when the invoice was marked, so no new expense arises.
    • It was not marked – debit 4350 "Lootusetud debitoorsed võlad".

    Amount to write off is the part of the invoice that is unpaid on the chosen date.

  4. 4

    Confirm

    Click Write off as uncollectible. The invoice header shows the Written off tag. Hover over the tag to see the date of the write-off and the amount written off.

When the buyer may be an employee, the dialog shows a warning: writing off an employee's debt is a fringe benefit (TuMS § 48 lg 4 p 9). A bulk write-off leaves out claims against related persons and claims over 30 000 €. You can write such an invoice off from its own page.

What changes after the write-off

  • The invoice counts as settled from the date of the write-off. It no longer appears in the sales ledger, on the balance sheet or among unpaid invoices. In the sales invoice list, find it with the Written off status.
  • The invoice cannot be edited or offset. If you need to, undo the write-off first.

When the client pays after all

Link the receipt to the invoice as usual. Among bank transactions Numera also offers written-off invoices, but never links one by itself: you confirm the receipt. Numera books an entry on the receipt date that brings the amount received back as a receivable and reduces the expense the claim was written off to. The payment is not income.

Undoing the write-off and reinstating the claim

  • Undo the write-off (from the invoice's ⋯ menu) deletes the write-off entries, and the invoice is in the same state as before the write-off. This is possible when all the entries are in an open period.
  • Reinstate the claim is for when one of the entries is in a locked period. Numera books a reversing entry on the chosen date and the claim is back on the balance sheet. The entries made so far stay.

Reducing VAT (KMS § 29¹)

The VAT on an invoice written off as hopeless may be reduced when every condition of § 29¹ of the VAT Act is met. The VAT is reduced in the return for the month of the write-off.

Conditions

The Reduce VAT dialog shows eight conditions and what Numera found for each:

  1. The invoice is a VAT invoice.
  2. The invoice's VAT was declared in the return for its own month.
  3. The claim has not been assigned to anyone.
  4. On the day of the write-off, at least 12 months and at most 3 years have passed since the due date.
  5. The claim has been written off as hopeless and its collection was attempted.
  6. A claim over 30 000 € is proven by a court decision in force.
  7. The buyer is not a related person (Income Tax Act § 8).
  8. The buyer was notified in writing in the month of the write-off.

You confirm with a tick the conditions Numera cannot check by itself (for example, that the claim has not been assigned). For a claim over 30 000 €, add the court decision as a file. VAT can be reduced only once every condition is met.

Notice to the buyer

  1. 1

    Choose Send the buyer a notice from the invoice's ⋯ menu

    The notice can be sent in the month of the write-off. It lists every invoice of that buyer written off in the same month.

  2. 2

    Check the recipient

    Numera suggests the buyer's invoice e-mail address. Change it if needed. View the notice opens the PDF attached to the mail.

  3. 3

    Send

    Click Send the notice. The notice lists the invoices written off and their VAT, and says that the buyer has to reduce its input VAT by the same amount (KMS § 29¹ lg 4).

The notice condition is met once the e-mail service confirms the mail was delivered. If it was not delivered, send it again to another address.

If you sent the notice outside Numera, by post or from your own mailbox for example, you can add it with its copy by choosing Add a notice sent elsewhere from the invoice's ⋯ menu; the condition is then met as well.

Reducing the VAT

  1. 1

    Choose Reduce VAT from the invoice's ⋯ menu

    Check the conditions and tick the ones you confirm.

  2. 2

    Check the entry

    The table shows the VAT to reduce by VAT rate, with the KMD line. The entry reduces output VAT (debit 2310) and the expense the claim was written off to (credit 4350 or 4351).

  3. 3

    Confirm

    Click Reduce VAT. In the VAT return for the month of the write-off, the turnover and VAT go down on the line of the rate the invoice was taxed at. INF A shows a row under the invoice when the buyer is on INF A that month.

When the return for the month of the write-off has already been filed, Numera asks for confirmation. After the reduction the period is marked as changed and the return has to be corrected.

When the buyer pays later, Numera adds the VAT on the part received back to the return for the month of the payment (KMS § 29¹ lg 3). When the buyer pays everything, exactly the amount the VAT was reduced by is added back.

To undo the reduction, choose Undo the VAT reduction from the invoice's ⋯ menu. The entry is deleted and the VAT is back in the return.

When a seller writes off your purchase invoice

When a seller has written off your unpaid purchase invoice as hopeless and reduced its own VAT, it sends you a notice. In the month you receive the notice you have to reduce the input VAT you deducted on the unpaid part of that invoice (KMS § 29¹ lg 4).

  1. 1

    Open the purchase invoice and choose Seller wrote off the claim from the ⋯ menu

    A dialog opens with the invoice's unpaid amount and the input VAT to reduce.

  2. 2

    Fill in the notice

    Notice received is the day you received the notice. VAT in the notice is the amount the seller names in the notice. If you leave it empty, Numera counts the VAT on what was unpaid that day. Attach the notice as a file.

  3. 3

    Check the entry

    The table shows the unpaid part by VAT rate, with the KMD line. Only the share you deducted is reduced: if you deducted VAT only in part (for example 50 % on car costs), the input VAT goes down by the same share. If you deducted by the proportion and the invoice's year has been recalculated at year end, the input VAT goes down by the actual proportion. For example, if the invoice carried 1,000 euros of VAT, you deducted 80 % of it and the year's proportion was recalculated to 70 %, the input VAT goes down by 700 euros. The entry increases the invoice's expense account (debit) and reduces input VAT (credit).

  4. 4

    Confirm

    Click Reduce input VAT. In the VAT return for the month the notice arrived, input VAT goes down on line 5. When the seller is on INF B that month, INF B shows a negative row under the invoice.

When that month's return has already been filed, Numera asks for confirmation. After the reduction the period is marked as changed and the return has to be corrected.

The record does not cancel the debt: the invoice stays among unpaid invoices and can still be paid. When you pay the seller later, Numera does not add the input VAT back by itself, because KMS § 29¹ does not say what the buyer has to do in that case. If your accountant finds the VAT should be deducted again, do it by hand.

To undo the record, choose Undo the input VAT reduction from the purchase invoice's ⋯ menu. The entry is deleted and the input VAT is back in the return.

Taxes

  • VAT – neither marking an invoice as doubtful nor writing it off reduces VAT by itself: the invoice's VAT stays in the return until you take the Reduce VAT step.
  • Income tax – expensing the claim of a customer unrelated to the company creates no income tax. Giving up a claim against an employee or a board member can be a fringe benefit (TuMS § 48 lg 4 p 9), and a claim against a related person has rules of its own. For such a claim, talk to your accountant first.

What Numera does not do yet

  • Expensing part of the amount – the mark always expenses the whole unpaid amount.

Accounting

Create an account and try Numera with your own company's numbers.

: Accounting