How to Write Off Bad Debt in NetSuite

Managing bad debt is a crucial aspect of financial operations for any business. In NetSuite, automation can streamline the process, reducing manual effort and improving financial accuracy. This blog explores how to automate bad debt management in NetSuite using workflows, scripting, and native features.

Understanding Bad Debt in NetSuite

Bad debt refers to outstanding invoices that are unlikely to be collected. Companies typically write off such amounts after a certain period to maintain accurate financial statements. NetSuite provides tools to handle bad debt efficiently through automation, ensuring compliance with accounting policies.

Steps to Automate Bad Debt in NetSuite

1. Define Your Bad Debt Policy

Before automating, establish clear criteria for bad debt classification, such as:

• Invoices overdue for 90+ days
• Customers flagged for credit issues
• Specific aging reports determining bad debt thresholds

2. Utilize Saved Searches for Identification

Create a Saved Search to filter invoices that qualify as bad debt.

1. Navigate to Reports > Saved Searches > All Saved Searches > New
2. Choose Transaction as the search type
3. Apply filters such as:
   • Type = Invoice
   • Status = Open
   • Due Date < Today – 90 days
   • Customer Credit Score < X (if applicable)
4. Set results to display Customer, Amount Due, Days Overdue, and Status
5. Schedule the search to run automatically and send email alerts

3. Automate Journal Entry for Write-Offs

A SuiteScript or Workflow can create Journal Entries to write off bad debt amounts automatically.

• Using Workflows:
  • Go to Customization > Workflow > Workflows > New
  • Choose Transaction as the record type
  • Set triggers based on overdue invoices
  • Create an action to generate a Journal Entry debiting the bad debt expense account and crediting accounts receivable
• Using SuiteScript:
  • A Map/Reduce Script can scan overdue invoices and generate journal entries in bulk
  • Implement logic to flag invoices as “Written Off” to prevent duplicate entries

4. Leverage NetSuite Dunning Letters

Dunning letters are automated reminders sent to customers for overdue payments. Configure these to escalate before final write-off:

• First Reminder (30 days overdue)
• Second Reminder (60 days overdue)
• Final Notice (90+ days overdue before classification as bad debt)

5. Reporting & Monitoring

Use NetSuite’s Aging Reports and Custom Dashboards to track bad debt trends.

• Navigate to Reports > Financial > Accounts Receivable Aging
• Customize reports with filtering for bad debt write-offs
• Use KPIs and alerts for monitoring outstanding amounts

Conclusion

Automating bad debt management in NetSuite enhances efficiency, ensures timely write-offs, and improves financial accuracy. By leveraging Saved Searches, Workflows, SuiteScripts, and Dunning Letters, businesses can minimize manual intervention and maintain a streamlined accounting process.