Record credit adjustments, debit memos, and write-offs

This article applies to Aiwyn Practice. The Accounts Receivable transactions ledger is available only to firms on Aiwyn Practice.

Record a write-off or credit adjustment on a client's account, record a debit memo for a returned or reversed payment, and correct a transaction recorded in error so the client's balance shows what they actually owe.

Before you start

• You can open Accounts Receivable in the left sidebar and have the permissions View the Billing module, View the Payments module, View payment history and View payments.
• The client exists in Aiwyn. To write off or credit a balance, the client has an open invoice to apply it to.
• You know which transaction you need: Write-off... for a balance your firm has approved not to collect, Credit adjustment... to correct a billing error or give a courtesy discount, or Debit memo... to offset a returned or reversed payment, such as a bounced check or failed ACH payment. See How write-offs differ from credit adjustments.
• For a write-off, you have your firm's approval, and you know the reason and the name of the person who approved it. A note isn't required, but recording the reason and approver preserves the approval record.
• For a debit memo, you have the returned payment amount and reference. The payment must have an unapplied balance before you can allocate the debit memo to it; if it's still applied to an invoice, unapply it first.
• This article covers balances on sent invoices. To reduce unbilled time or expenses before you invoice, see Write down or write off unbilled work.

Steps

Record a write-off

1. Select Accounts Receivable in the left sidebar. The Transactions tab opens.
2. Select the chevron (▾) on the right side of New transaction.
3. Select Write-off....
4. In Client, type and select the client. Their open invoices and debit memos appear in the Allocation section.
5. In Note, enter the reason for the write-off and who approved it. For example, "Hardship – Spoke with Owner. Approved". A note isn't required, but it creates a useful approval record.
6. In Transaction date, enter the date you're recording the write-off.
7. In Total write-off amount, enter the amount to write off.
8. In the Allocation section, select the invoice or invoices to write off, then set the amount to apply to each invoice. You can't apply more than an invoice's remaining balance.
9. Select Save & Close. To record another write-off straight away, select Save & New... instead.

The write-off appears in the Transactions list with the status Issued, and its amount shows in the Credit Amount column.

Record a credit adjustment

1. Select Accounts Receivable in the left sidebar.
2. Select the chevron (▾) on the right side of New transaction.
3. Select Credit adjustment....
4. In Client, type and select the client. Their open invoices and debit memos appear in the Allocation section.
5. In Note, describe what the credit is for, such as the billing error it corrects or the discount it gives.
6. In Transaction date, enter the date of the adjustment.
7. In Total credit adjustment amount, enter the amount of the credit.
8. In the Allocation section, select the invoice or invoices to apply the credit to. To keep the credit on the client's account for later, leave the section empty. The credit then counts toward the Unallocated badge until you apply it, following Record and allocate payments.
9. Select Save & Close, or Save & New... to record another.

The credit adjustment appears in the Transactions list with the status Issued and its amount in the Credit Amount column. Its Allocation dot is filled green when it's fully applied, yellow when it's partly applied, and empty when it's unapplied.

Record a debit memo

Record a debit memo when a payment that was already applied to an invoice is returned or reversed, such as a bounced check or failed ACH payment. This process reopens the invoice, clears the failed payment's remaining balance and preserves both transactions in the client's account history.

Before you start

Have the returned payment amount and payment reference available.

The payment must have an unapplied balance before you can allocate a debit memo to it. If the payment is still applied to the invoice, unapply it first.

Unapply the returned payment

1. Open the client record and go to the Transactions tab.
2. Find and open the returned payment.
3. Remove the payment's allocation from the invoice.
4. Save the change.

The invoice reopens with its balance due, and the payment becomes unallocated.

Create and allocate the debit memo

1. From the client's Transactions tab, click New transaction.
2. Select Debit memo.
3. On the New Debit memo screen, enter the amount of the returned payment.
4. In the Allocation section, select the unallocated payment.
5. Enter the amount of the debit memo to apply to the payment.
6. Save the debit memo.

A debit memo can be allocated to a payment with an unapplied balance, not directly to an invoice. If the payment does not appear in the Allocation section, confirm that you removed its invoice allocation and that it has a remaining balance.

Confirm the result

Return to the client's Transactions tab and confirm:

• The payment has a $0.00 remaining balance.
• The debit memo has a $0.00 remaining balance and identifies the payment it offsets.
• The invoice is open again for the returned amount.
• The reopened amount appears in Collections.

The debit memo appears in the Transactions list with the status Issued and its amount in the Debit Amount column. The original payment and debit memo remain in the transaction history, creating an audit trail of the reversal.

What the client sees

Debit memos are internal and do not appear in the client portal. The client sees the reopened invoice and its amount due, and can pay it again.

Correct a transaction recorded in error

You can't change or delete a saved write-off, credit adjustment or debit memo. Either disable the incorrect transaction or record an offsetting transaction.

Disable the transaction

1. Open the client record and select the Transactions tab.
2. Open the incorrect transaction's actions menu and select Disable transaction.
3. Confirm the change.

The transaction becomes inactive and remains visible for the audit trail. Any invoice amount affected by the transaction reopens. Disabling a transaction can't be undone in Aiwyn.

Record an offsetting transaction

1. Choose the offsetting transaction. Use a credit adjustment if the incorrect entry left the client owing too much. Use a debit memo if an incorrect write-off or credit adjustment left the client owing too little.
2. Start the transaction, following "Record a credit adjustment" or "Record a debit memo" above, and enter the amount of the error.
3. In Note, enter the date, amount and reference of the transaction you're correcting, and why you're correcting it.
4. Allocate the new transaction to the incorrect transaction if it appears in the Allocation section. Only transactions with an unapplied balance appear.
5. Select Save & Close.

Both transactions remain in the Transactions list, preserving the audit trail.

Related

• How write-offs differ from credit adjustments
• Why AR transactions are corrected, not deleted
• Record and allocate payments
• Invoice correction transaction reference
• Transactions list reference
• Work with the transactions list
• How allocation determines a client's true outstanding balance
• How to change a sent invoice
• Write down or write off unbilled work