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Unlike a write-down or a credit note – vehicles used to manage fees and disbursements billed to clients to reflect some level of negotiation or inefficiency, a write-off implies the end of the collection process, resulting in a “bad-debt expense”.
For this reason, most organizations restrict the write-off of time and disbursements from most users with the following exceptions;
The File Closing Department:
Typically, organizations will grant access to those responsible for the file closing process to write-off unbilled time and/or disbursements – with limited values per timekeeper or per disbursement code not to exceed an amount per matter. This type of access enables those responsible to remove immaterial unbilled time and/or disbursement entries from the file. Due to the limit on amounts, the classification of the amount as “written-off” will not compromise the client and matter profiles when assessing the latter for viability within the organization.
Best Practice Consideration: Organizations with a clear policy on “write-offs” prefer to issue a 0.00 invoice to remove time and disbursement entries which cannot be recovered (billed) due to the organization’s inefficiency (i.e. latent time and disbursement entries). This process ensures that the client and matter profile are not compromised with any written-off values which in this case would result in an unfair representation of the transaction.
The Collections Department:
Typically, organizations will grant unlimited access to the write-off function those responsible for the collection process. Where collection efforts have been exhausted and the organization is willing to assess the written-off information as a loss, this type of secured functionality, will enable those responsible for managing the collections process to execute the write-off unbilled time and/or disbursements, as well as the write-off of receivable balances.
Best Practice Consideration: Where the unbilled time and or disbursement is material in nature – typically greater in value than what would otherwise be permitted to the file-closing department, the collections departments will issue an invoice reflecting an accurate value of the work. The latter is then written-off as part of the receivable balance offering greater control in the event of recovery and/or an assessment of costs.
Users with the right to write-off unbilled time and/or disbursement entries are also able to reverse unbilled time and/or disbursement entries with a write-off date in a closed fiscal period. As the unbilled time and/or disbursement write-offs are typically limited in volume and value (see above), if this use-case were to occur it would be extremely rare.
With this type of controlled functionality, in the rare situation where a reversal of an unbilled disbursement write-off with a write-off date in a closed period were to occur, for the latter not to be reflected as a restatement of unbilled disbursement as at the transaction date of the affected unbilled disbursement entry, the organization should journalize the impact into the current fiscal year
OTHER DOCUMENTS:
Member - WIP Modifications and Write-Off Limits - Use Case and Changes
How to reverse WIP entries Selected for Write Off
Impact of Restoring Prior Year WIP Write Off in the Current Year