In SAP FICA, Write off is a concept that comes after dunning. Lets say if send the dunning letters, charged the late fees, turned off the service, but customer still hasn't paid - now we eventually have to give up. This giving up process is called Write Off.
In this article we will go through end-to-end guide of Write Off in SAP FICA (BRIM).
What is Write Off?
In accounting terms, a Write-off is the process of removing an uncollectible debt from your "Assets" (Receivables) and moving it to "Expenses" (Bad Debt). Lets understand from an example:
Invoice: We sell an item worth $100, the invoice document posted and open items get created and posted in FICA.
Dunning: One due date reached for the open items and customer not yet paid. We start chasing the customer for few months by sending dunning letters, adding charges, disconnecting the service. But no payment received yet.
Decision: It costs more to chase this money than it is worth.
Write-off: We clear the open items on the customer account and book a $100 loss in General Ledger.
To understand its end-to-end process flow lets divide this article in 4 phases:
Prerequisites & Master data
Configuration
Execution
Technical Enhancements
Prerequisites & Master data
The pre-requisite for the write off are:
The item must be open
The item must not be locked for clearing
Write off reason: This is the key piece of configuration. We cannot write off an item without assigning a reason (e.g., "Bankruptcy", "Small Amount", "Settlement").
Configuration
SPRO Path: Financial Accounting (New) -> Contract Accounts Receivable and Payable -> Business Transactions -> Write-Offs
Define Write-off Reasons (TFK048)
Define Account Assignment (T030)
Define Automatic G/L Account Determination for Taxes
Execution
We have two modes for execution of Write-offs: "Single" and "Mass".
Manual Write-off ( FP04 )
Go to T-Code FP04
Enter Contract Account or Business Partner.
Choose the open items (Document no.) to be written off.
Select the Write-Off Reason (e.g., 03 Goodwill).
The system clears the item and posts the expense document.
Mass Write-off Run ( FP04M )
General Selections: Filter by Company Code or Contract Account Group.
Time/Age Selection: "Days in Arrears > 365" or "Dunning Level = 4".
Posting Parameters: Set the default Write-Off Reason (e.g., 02 : Uneconomical).
Schedule: Run in background (Parallel Processing).
Once write-off is done the clearing status & reason will get updated in DFKKOP table. If we want to reverse write-off on any item, then we can use use T-Code FP07.
Technical Enhancements (Optional for Functionals)
As an ABAP developer, we have few FQEVENTS then we can see and modify as per our requirement in T-Code FQEVENTS.
Event 5101 - Check Write-off Validity : This checks if any item is eligible for write-off. It executes in FP04/FP04M.
Event 5006 - Write-off Amount Check : Triggered during FP04. Use this to enforce approval limits (e.g., "User X cannot write off more than $500")