Lump-sum value adjustment (LVA)

The general bad debt allowance (GVA) is an instrument of Accounting, which recognises the general default risk of customer receivables. In contrast to specific bad debt allowances, in which specific receivables are examined and written down if necessary, bad debt allowances represent a generalised provision for defaults that are difficult to calculate - for example in the case of numerous small receivables.
Even though SAP Business One does not offer a specific function for general bad debt allowances, the PWB Proper manual mapping. By analysing the receivables portfolio in a structured manner and making targeted journal entries, the general default risk can be correctly taken into account in the accounts - in accordance with HGB and tax law requirements.

E-invoicing in Germany: How to implement the obligation with SAP Business One

Application in SAP Business One:
SAP Business One offers No automatic function for carrying out general value adjustmentsbut these can be manually via journal entries to map. The basis for this is a corresponding evaluation of the net receivables portfolio.

Typical procedure:

Determine calculation basis:
- Analyse receivables (debtor accounts) as at the balance sheet date
- Subtract VAT (as PWB is only applicable to net values)
- Determine average failure rate (e.g. 1-3 %) based on past years
Manual booking in SAP Business One:
- New formation of the PWB:
  
  Write-downs on receivables (expense account) to general bad debt provision (liability account)
- Reduction or cancellation:
  
  General valuation allowance to income from reduction of valuation allowances
SKR 03 account examples:
- 0996 / 0997: Lump-sum value adjustment (depending on remaining term)
- 2730: Income from PWB reversal
- 5450: Expenses for value adjustments
Document posting:
The PWB is entered as a journal entry via Financial accounting > Postings > Journal entry recorded manually.
One Preliminary account assignment with Excel or query enquiry can support the calculation basis.

Practical example (new formation PWB):
A company has net receivables of € 200,000. It expects a flat-rate loss of € 1 %.
→ PWB = € 2,000

Important notes:

the value added tax may only be adjusted in the event of an actual bad debt loss (§ 17 UStG).
One Combination of PWB and EWB is permissible: First individual assessment of conspicuous accounts receivablethen PWB to the adjusted remaining balance.
To the annual accounts the PWB must be regularly adjusted - either by new formation or dissolution.