Legal debtors

When a debtor enters litigation, a separate process starts for bad debt provision or write-off. All items for the customer's account are transferred to a legal status within accounts receivable. A general ledger journal is effected between trade debtors and legal debtors.

A provision for doubtful accounts, or bad debt reserve, is created as a reduction in accounts receivable. Bad debt reserve shows the value a company anticipates as being uncollectible.

When a customer’s debt is written off, the open items are cleared by posting their amount to the GL write-off account.

Netherlands specifics

If an invoice not yet been paid one year after the noted ultimate pay date, VAT can be reclaimed from the tax authorities.

If no payment term is stated, a payment term of 30 days applies.

If a customer is bankrupt then the VAT may be claimed back immediately, as it is clear that the customer can no longer pay.

Reclaim the VAT by specifying a negative turnover and negative VAT amount at question 1a / 1b of the VAT return.

Reclaim the VAT in the VAT return for the period in which the one-year term has expired.