Some invoices will never be paid because the customer is gone, or because collecting the debt would cost more than the balance. A write-off clears the invoice’s full remaining balance as uncollectable and records the loss in your books.
When to Use This
Use a write-off when you have decided the invoice balance will not be collected and you are ready to record the loss. You can write off only the full remaining balance, and you cannot undo the write-off afterward.
If the original obligation was satisfied another way, such as through a separate renewal payment, a refunded duplicate payment, or another transaction for the same charge, write off the invoice after you confirm it will not be collected. This keeps the invoice from staying open in A/R.
When you need to record inventory loss for a cancelled order, writing off the invoice is usually better than voiding it. Voiding can leave the related inventory in an inconsistent state, while a write-off records the loss correctly.
If a payment on this invoice used the wrong method, was refunded, or was offset by a credit memo, review that activity before you write off the remaining balance. A write-off clears only the amount still due, so it does not reverse or explain an earlier payment or refund. If money seems to be missing, check the payment’s own settlement status separately.
If the customer pays after you write off the invoice, you cannot reopen the written-off invoice to record the payment. Instead, recreate the invoice and apply the payment to it, and note the original written-off invoice for reference. You can also record the payment without recreating the invoice and note the original invoice on it, but that leaves the payment as a credit on the account for future use.
Prerequisites
- Permission to create write-offs.
- An open batch for the invoice’s business unit to record the write-off.
Write Off an Invoice
- Open the invoice.
- Open Invoice Options and select Write Off this Invoice.
- Choose the batch that should record the write-off.
- Choose the write-off method: Direct or Allowance. Rhythm starts with your business unit’s default method.
- If you chose Allowance, choose the bad debts expense account that should receive the loss. Rhythm starts with your business unit’s default account, when it has one.
- Add a memo or internal notes if you want them.
- Select Write off Invoice #[number].
Result
Rhythm clears the invoice’s full remaining balance, marks every line and the invoice as written off, and records the loss in the ledger using the method you chose. If the affected transaction uses a deferral product configured for revenue recognition, the write-off also creates a deferral schedule, just like a credit or debit memo.
Warning
The write-off runs as soon as you select the write-off button, and there is no confirmation step. The action is permanent: you cannot void, reverse, or delete a write-off afterward, and a written-off invoice can never take a credit or debit memo. Make sure you are ready before you select the write-off button. Rhythm does not delete the invoice; it stays in Rhythm and may still appear on the customer’s account record for audit and history.
Tip
If a written-off invoice still shows a balance due or appears open, the issue may be with the display rather than the accounting. Reopening the invoice’s batch and resaving the invoice details can clear an incorrect balance-due display without changing the write-off itself.
Direct or Allowance: Which Method to Use
- Direct reverses the revenue the invoice recorded, line by line. This is the default when your business unit has no default write-off method set.
- Allowance draws on money your association has already set aside for expected bad debt. It charges the loss to a bad debts expense account instead of reversing revenue directly. Choose this method when your books already carry a reserve for bad debts and you want the write-off to draw on that reserve rather than reverse the original revenue. Rhythm creates the bad debts expense G/L entry when the batch you used for the write-off is posted, not when you process the write-off.
Your business unit can set a default method and, for allowance write-offs, a default bad debts account so staff do not have to choose them each time. See your business unit’s setup to change these defaults.
Why You Can't Write Off This Invoice
Rhythm refuses to write off an invoice and does not save anything when:
- The invoice was imported from an earlier system.
- The invoice is pro forma. A pro forma invoice is not a real invoice yet, so there is nothing to write off.
- The balance due is already zero, or the invoice’s total is zero. In either case, there is nothing left to write off. If you move a zero-total invoice into an archived batch instead, that only excludes it from A/R Aging reports; it can still appear in invoice queries or other invoice lists. The same limit applies to receiving a payment: once an invoice already shows Paid with no balance due, Rhythm will not let you apply a payment to it because there is nothing left for the payment to reduce.
- The invoice has already had a write-off applied to it. Rhythm will not write off the same invoice twice.
- The write-off doesn't match the invoice's current balance due exactly. Partial write-offs are not supported, so the amount must equal what is currently owed. If a payment or adjustment reached the invoice after you opened it, reload the invoice and try again.
- The invoice is in a foreign currency, or the write-off’s business unit or currency does not match the invoice’s own. Multi-currency write-offs are not supported.
- The invoice's balance due matches its invoice amount, but its underlying subledger totals don't. Even when the visible balance looks correct, the write-off can fail if the invoice’s subledger entries are out of sync. Contact Support if you run into this.
Related Reading
If the invoice needs a smaller correction instead of a full write-off, use a credit or debit memo to adjust part of what is owed.