A bad-debt provision is posted into General Ledger by the Research Accounting Team at the end of every month once Accounts Receivable has closed for that month. All invoices which are 60+ days past their due date as of the final day of that month (irrespective of whether they have been settled in the next accounting period) have a bad-debt provision posted against them to account for the increasing risk of non-settlement.
The value of the bad-debt provision posted against an invoice is determined by the age of the invoice and the balance due, as per the following:
- 60 - 182 days past due = 25% of the balance due
- 183 - 364 days past due = 50% of the balance due
- 365+ days past due = 100% of the balance due
The bad-debt provision is posted to the original sale's cost centre and source of funds using a transaction code of FJNA