How to record the non-payment of a client in the accounting of a company

Among the setbacks that failing to collect an invoice entails, we must include the fact that this non-payment must be reflected in the company's accounting with the intention that everything is perfectly balanced.

NewsEditor
NewsEditor
29 November 2022 Tuesday 03:42
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How to record the non-payment of a client in the accounting of a company

Among the setbacks that failing to collect an invoice entails, we must include the fact that this non-payment must be reflected in the company's accounting with the intention that everything is perfectly balanced. In large companies or those that have staff dedicated to accounting, it is easier. However, smaller companies and the self-employed have to manage to know the formulas that allow them to reflect these situations.

A company uses accounting to find out its patrimonial situation, the resources it has and the possibilities it has, keeping the accounting up to date is essential to carry out a business.

Through company accounts it is possible to liquidate and fulfill tax obligations. Through them, it is possible to be more aware of the state of the company and, in this way, to be able to show it to whoever needs to know it. Always in the most transparent way possible.

Put another way, accounting is like a language. If we know this language, we will be able to understand the messages they send us and, therefore, it will be much easier to understand each situation. You must have a minimum knowledge to understand the accounts of a company correctly.

Every time a sale is made, it must be accounted for. All sales are recorded and are expected to be collected in a certain time, which is either established in the invoice or in the time regulated by law, 30 days.

If the payment is not made when the due date arrives, the first mission is to contact the client to try to get them to pay their debt. In most cases, this type of non-payment is solved with a simple conversation. It is very common for customers to have misplaced the invoices or have a specific problem making the payment and they can solve it easily.

When the non-payment is resolved, the sale can be recorded as such and thus have no more worries about it.

So, is it necessary to record a default as a sale?

Although the most normal thing is that a non-payment can be solved in a simple way, if an agreement cannot be reached with the client, it will be necessary to record the invoices that have not been collected in the accounts. This will allow balances to be in line with reality.

It must be taken into account that customers are marked in accounting with account 430, while debtors are marked with account 440.

Once there is evidence that it will not be possible to reach an agreement with the debtor in a friendly manner, it must be reflected in the accounting.

The accounts must verify the real situation in order to show the most faithful of the company's situation on the balance sheet. If default is added, control will be much greater and current assets will indicate what is really happening in the company.

To show it in the accounts, we will use account 694 in the DEBIT, which indicates "impairment losses of credits for commercial operations" and the HBER, account 490, which indicates "impairment of value of credits for commercial operations". It must be marked that the "customer is doubtful" (436).

In the event that the customer never carries out the payment, the deterioration should not be maintained. Of course, we must declare the loss of money that we will not receive.

To do this, the impairment and the doubtful customer account are eliminated from the balance sheet and the loss is added to the income statement.

The most normal thing is that after claiming the invoice, the company receives the amount owed. In this case, it will also need to be reflected in the accounting.

On some occasions, to obtain payment, a payment procedure must be started that will allow the money owed to be collected.

In the event that the debt is settled, the accounts must be repaired, now that the client has canceled the non-payment that he had contracted with the company.

On this occasion, care must be taken not to adulterate the non-payment, for this a deterioration must be given to the customer item. In this case, an income is added through account 794, "reversal of credit impairment for commercial operations."

In conclusion, it is essential that the accounts are registered correctly. Thanks to this, it will be possible to be aware of the reality of the company, non-payments in accounting should never be avoided.

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