Two of our clients had debts with us dating back to a year. We passed this onto debt collection and the clients paid but a percentage was taken from these payments for debt collection fees.
I have posted the amounts that have been paid to us by the debt collector however it leaves small underpayments due to the fees. How would I record this? I am using Sage 50 accounts.
Lets say the Debt Agency managed to get £120 of £150 debt, and subsequently took £20 fees
Clear £120 off the sales invoice, post a £20 payment to legal and professional - that balances the bank to the £100 received. Then create a £30 credit note to bad debt for the remaining sales invoice balance.
Your sales credit note would account for the VAT to match what happened on the sales invoice.
The agency fees would depend on whether you had been charged VAT
So if you charged 20% VAT on the original invoice, you would calculate the VAT within the remaining balance at 20%. If the invoice was raised at a time when VAT was 17.5%, you would calculate the credit note with 17.5% within.
