Projects:Doubtful Debts/Functional Specification

Contents 1 Introduction 2 Glossary 3 Doubtful Debt Document 4 Doubtful Debt generation process 5 Accounting 5.1 Configuration 5.2 Example 6 Requirements

Introduction

This document contains the functional specifications for the Doubtful Debts functionality, which is intended to deliver capabilities to manage Doubtful debts.

Glossary

• Bad debt: receivable that has been clearly identified as not being collectible.
• Doubtful Debt: receivable that might become a bad debt at some point in the future.

Doubtful Debt Document

It is an accounting document that has a direct relation with an invoice payment plan. It stores the percentage (amount) of the invoice outstanding amount that has been recognized as doubtful debt. Each doubtful debt document is linked only with one invoice (payment plan). This will allow to reactivate documents independently.

Statuses:

• Draft
• Completed

Workflow:

• The doubtful debt process will generate the documents in completed status.
• Completed ---- Reactivate (action) ----> Draft: this is a manual action.

Doubtful Debt generation process

A new standard window will be created to behave as a filter window (following the approach of Open/Period control window). The user will create a new record (process parameters will be persisted) containing the following information:

• Organization (mandatory)
• Percentage (mandatory): 100% by default. Percentage of accounts receivable that will be uncollectible.
• Days overdue (mandatory): consider only sales invoices that are due for more than given days.
• Business Partner (optional): consider invoices of this business partner.
• Business Partner Category (optional): consider sales invoices of business partner that belong to given business partner category.

Once the required information has been filled the user will preview in a Pick&Execute window all the invoice payment plans that meet the filter conditions.

It will possible to edit the percentage (amount) to recognize as doubtful debt. The doubtful amount will be calculated (and defaulted) based on the outstanding amount of the invoice and the percentage entered on the filter window.

The process will generate as many doubtful debt documents as invoices selected in the pick&execute window.

Accounting

Configuration

• Allowance for Doubtful Debts: this account will be configured at accounting schema defaults and business partner category level.

Example

There is a sales invoice for "Healthy Food Supermarkets, Co." of 1000€. The full amount has been considered as doubtful debt because the customer has declared bankruptcy.

Account	Description	Debit	Credit
436	Clientes de dudoso cobro	1000
430	Clientes		1000

Record the credit impairment.

Account	Description	Debit	Credit
694	Pérdidas por deterioro de créditos comerciales	1000
490	Deterioro de valor de créditos por operaciones comerciales		1000

"Healthy Food Supermarkets, Co." pays 250€

Account	Description	Debit	Credit
570	Caja,euros	250
436	Clientes de dudoso cobro		250

Undo the credit impairment.

Account	Description	Debit	Credit
490	Deterioro de valor de créditos por operaciones comerciales	250
794	Reversión del deterioro de créditos comerciales		250

Register as a bad debt because the debt cannot be collected and all reasonable efforts to collect it have been exhausted.

Account	Description	Debit	Credit
650	Pérdidas de créditos comerciales incobrables	750
436	Clientes de dudoso cobro		750

Remove the credit impairment.

Account	Description	Debit	Credit
490	Deterioro de valor de créditos por operaciones comerciales	750
794	Reversión del deterioro de créditos comerciales		750

Requirements

Num	Requirement	Importance	Status
1	Ability to preview the doubtful debts based in a given criteria.	Must Have	not done
2	Ability to edit the percentage (amount) of the proposed the doubtful debts.	Must Have	not done
3	Doubtful debt accounting document. It will generate the accounting and it will have the traceability to the source document (sales invoice).	Must Have	not done
4	The document can be reactivated.	Must Have	not done
5	Ability to configure the account to be used for Allowance for Doubtful Debts.	Must Have	not done
6	Aging Balance: ability to include/exclude doubtful debts in the report. If it is included it should be displayed separately.	Must Have	not done
7	Ability to exclude some customer from doubtful debt process.	Must Have	not done

Category: WorkInProgress