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I am Working in service industry like Health, Once the approval for treatment came from Insurance i make the invoices, But later on customer will not appear for taking their approved sessions,,,,!
During the month i make invoices against approvals shows high profit , but later it decreasing as we make credit memo for no shows of customer...
So there is no fix value of Profit & loss account , when we make credit memo it effect the invoice and then monthly statement also changed...Need your suggestion Please
For a service industry revenue should be recognised on completion of the service. And hence based on past trends provision in respect of credit memo for current month should be recognised.
For Ex - If a total of Rs. 100 approval is received during the month and on the basis of past trend it is seen that 40 % of the customers do not appear for approved sessions, then revenue to the xtent of 60% should be recognised in current month. The same should be actualised in the next month based on actual credit memos
I think the best Answer added by: Nishant Bhatia Finance Manager 13 days ago
Credit memo is issuing to the customer for any discount, drop price or against a claim approved by supplier.
From the provided information it seems you are having a monthly closing cycle for your P&L.
The best practise would be to make a provision of services that have been billed but no provided.
Thereafter in the preceding month appropriate reversals need to be done..
More information would be needed for helping you with a numerical example.
