Provisioning of Overdue Receivables

Due to the new impairment model of IFRS 9, Expected Credit Losses (ECL) on Trade Receivables are calculated using a provision matrix, where fixed provision rates apply depending on the number of days that trade receivable is outstanding. For the calculation of the provisioned amounts, you can periodically perform a valuation run to calculate the bad debt expense posting for overdue items. If you agree with the proposal of the valuation run, you can transfer the valuation to the general ledger to generate the postings. The system makes the adjustment posting for the relevant key date and reversal postings for the date after the key date.

Key Process Steps Covered

  • Maintain customer specific provision matrix via SSCUI
  • Use a valuation program for the flat-rate value adjustment that works like the payment and dunning run
  • Define each valuation run explicitly through the execution day and an identification
  • Specify the execution type of the valuation by defining various parameters
  • Improve efficiency through reuse of parameters from existing valuation runs
  • Analyze defined accounts through the valuation run and create valuations in a proposal run
  • Create the posting in G/L accounting during the transfer and save the valuations for each line item
  • Make reversal postings for the day after the relevant key day

Benefits

  • Meet the legal requirements
  • Automate the valuation process of trade receivables and reduce cost by less manual effort