How do I write off bad debt, or correct a write-off, after a period is closed?

You can write off an uncollectible invoice with a credit memo or with a general ledger write-off. If an earlier write-off was booked incorrectly and its period is closed, correct it in the current open period instead of reopening the closed one.

Scenario

“We need to write off an invoice that won't be paid. We also booked an earlier write-off to the wrong product, and that month is already closed and audited. How do we fix it without reopening the period?”

Two ways to write off bad debt

A write-off removes an amount you won't collect from accounts receivable. Choose the method that matches your accounting policy:

• Credit memo. Complete a reversing contract change. Maxio creates a credit memo and a negative transaction, which reduces both accounts receivable and deferred revenue.
• General ledger write-off. Use a Bad Debt item that posts to your Bad Debt Expense account and is set not to sync with Maxio. Revenue recognition in Maxio stays unchanged.

For more on each write-off method, see How do I handle bad debt?

Maxio doesn't provide accounting advice. Confirm the right treatment with your accounting team.

Why closed periods stay locked

Once you set a Maxio Core Closing Date, revenue and invoice records dated on or before it can't be added, edited, or deleted. This keeps audited periods exactly as they were reported, so a mistake in a closed month has to be corrected in a later, open month.

Correct a write-off in the current open period

This example uses QuickBooks Online, where a write-off credit memo was booked to a revenue product instead of the Bad Debt product.

To correct the write-off

1. Confirm with your auditors that the correction can be recorded in the current period, and that the period is still open in Maxio Core.
2. In QuickBooks, create an invoice dated in the open period for the same amount, using the product from the incorrect credit memo. This offsets the original entry.
3. Create a credit memo for the same amount using the Bad Debt product, and apply it to the new invoice.
4. Sync the invoice, credit memo, and credit application into Maxio Core.
5. If your QuickBooks integration has Automatically Generate Transactions after Sync turned on and the product has Enable Create Transactions selected, the sync builds a transaction and revenue for the new invoice line. Check the line, and if it has a transaction, delete that transaction. The synced invoice line stays on the contract. For details, see Edit or Delete Transactions.
6. Check the contract for an out-of-balance alert. An invoice line without a transaction can leave a contract out of balance. If it is, contact Maxio Support before you close the period. For more, see How to Identify and Correct Out-of-Balance Conditions.

The closed month stays as it was audited, and the incorrect balance clears in your general ledger from the correction date forward. Leave the new invoice line without a revenue transaction, because it's a correction rather than a new sale.

Try the correction in a sandbox first. Maxio Support can refresh your sandbox with a copy of your production data.