Write off an unpaid invoice
This article explains what to do if you have an overdue invoice in FreeAgent that you know your customer isn't going to pay you for.
Your customer may have gone out of business or be refusing to pay because of a dispute. This is called a bad debt. If the invoice isn't a bad debt, you should create a credit note instead of following the steps below.
Please note that it's not possible to write off individual items on an invoice that has been partly paid. The value written off will be apportioned between all items on the invoice. If the invoice has been partially paid, selecting the 'Write off as unpaid' option will only write off the remaining balance of the invoice, not the entire invoice.
1. Find the invoice
Navigate to the ‘Work’ tab at the top of the screen and select ‘Invoicing’ from the drop-down menu.
Filter the view to 'Overdue' and select the relevant invoice.
This will open the invoice.
2. Write Off Unpaid
Select the 'Actions' button and choose 'Write off as unpaid' from the drop-down menu.
You won't see this option until the invoice is overdue, i.e. past its due date for payment. If you need to write off the invoice sooner than that, you can change the due date by selecting the 'Edit' button at the top-right. Please note that the invoice will need to be in draft status before you can edit any of the details. To mark an invoice back to draft status, select 'Make Draft' above the invoice template.
Select ‘Yes, write off as unpaid’ in the pop-up window to continue.
FreeAgent automatically writes the invoice off as of today’s date. If you need to change the date that the invoice was written off, select the 'Change write-off date' link.
Please note that if the invoice has been partially paid, selecting the ‘Write off as unpaid’ option will only write off the remaining balance.
What happens next?
After writing off an invoice as unpaid, if you then navigate to the ‘Contacts’ area of FreeAgent, you’ll see that the amount this contact owes you has either been reduced or has changed to £nil. If it has changed to £nil, there will be nothing displayed as owing or owed for that contact.
It’s correct for the amount to be £nil if the invoice you have just written off as unpaid was for the only amount left outstanding for this contact. If they owed you for any other invoices for which they are going to pay you, you would still see the amounts of these left on the ‘Contacts’ page.
You can then write off other invoices as unpaid individually. The 'Write-off as unpaid' button will also work if a customer has paid you in part for an invoice and you’re writing part of it off.
The write-off in your accounts
To view the impact of the write off in your profit & loss account, follow the steps below.
Navigate to the ‘Accounting’ tab at the top of the screen and select ‘Reports’ from the drop-down menu.
In the ‘High Level’ section, choose ‘Profit & Loss'.
If you wrote off the invoice today, filter the time period to include the full accounting year that you wrote the bad debt off in.
You'll see a new entry in 'Bad Debts Written Off' for this invoice and your profit has reduced (or loss increased) by the amount of the bad debt.
What happens if I write off the wrong invoice?
If you write off the wrong invoice, you can restore it by selecting the ‘Actions’ button and choosing ‘Reopen’ from the drop-down menu.