Crediting subscribers for an outage last month
How a provider credits subscribers for downtime that belongs to an earlier month's invoice, keeps the VAT right and leaves debtors accurate.
By Achekam · · 4 min read · For Telecoms businesses in South Africa, Nigeria, Kenya
Last month a fibre cut took a suburb offline for most of a weekend. The network team fixed it, the complaints have died down, and now the commercial question arrives: the affected subscribers were billed for a full month of service, many of them have already paid, and your terms or your goodwill say they should get something back.
The tempting shortcut is a discount on this month's invoice. It is quick, but it muddles two months together. This month's invoice ends up showing less revenue than the service you are actually delivering this month, last month's invoice still shows a charge for service the subscriber did not get, and nobody can later tell which credits relate to which outage.
The cleaner way is to credit the invoice the outage belongs to. Here is how that works in Achekam, and what it does to VAT and to your debtors.
The credit note starts from the original invoice
In Achekam a credit note is issued from the invoice it corrects, either in full or for chosen lines. There is no credit note without an invoice. That rule suits outage credits well: every credit points back to the month and the service it relates to.
For an outage, the line to choose is usually the monthly service line on each affected subscriber's invoice. Installation charges, equipment and once-off fees on the same invoice are left alone, because the outage did not affect them.
Credit notes work at the level of whole invoices and chosen lines. Write your outage policy with that in mind. A policy that credits the affected service line for the month is simple to apply the same way on every invoice. If your policy credits only part of a month, agree with your accountant how that portion is shown before you start, so that every subscriber's credit is worked out the same way and the figures can be checked.
The credit note posts to the ledger, can be downloaded as a PDF, and can be e-mailed to the subscriber, which is the simplest way to tell them the credit has been applied.
VAT follows the original invoice
When an invoice line states no rate, VAT is taken at the rate in force on the invoice date. A credit note, in turn, uses its original invoice's date and tax codes.
For an outage credit issued this month against last month's invoice, that means the VAT on the credit is worked out on the same basis as the VAT on the invoice: the same tax codes, by reference to the same date. If a rate changed between the two months, the credit still matches what was charged. You do not need to work out the VAT on each credit by hand, which matters when one outage produces credits for a whole suburb.
Leftover credit on the subscriber's account
What happens next depends on whether the subscriber has paid.
The invoice is unpaid. The credit reduces what is owed on it. The subscriber pays the smaller balance.
The invoice is already paid. The credit cannot reduce a balance that is already nil, so it is held for the subscriber as leftover credit. A business can record customer payments against one invoice or spread across a customer's invoices, any extra is held on the customer's account, and receipts can be re-allocated. In practice the subscriber's credit stays on their account. Agree with your accountant how it is applied to later invoices, and remember that an administrator can refund a receipt if a subscriber is leaving.
Tell paying subscribers which of these applies to them. "You will see a credit on your account" is clearer than a lower bill that nobody explained.
The age analysis after the credit
Receivables are aged into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals. A month after an outage, look at the age analysis for the affected area. ACCA's article on accounts receivable management explains how a business monitors what it is owed with an aged analysis.
- Subscribers who had not paid should show smaller balances, or none.
- Subscribers who had paid should owe nothing for that month, with the credit held on their accounts.
- Anyone still overdue for the outage month may be withholding payment until the credit arrives. Check whether their credit note was issued.
Credit control e-mails overdue reminders and a monthly statement to customers with a balance. Issuing outage credits promptly means subscribers are not chased for amounts you have already agreed to credit.
Agreeing an outage credit policy
Outage credits go wrong mainly when they are decided case by case, by whoever answers the phone. A short written policy avoids that. It should answer:
- What qualifies? How long an outage must last, and whether planned maintenance counts.
- Who qualifies? Every subscriber in the affected area, or only those who reported it.
- How much? The service line for the month, or a defined part of it.
- Who approves? One named person signs off the list of affected subscribers before credits are issued.
- When? Within a set time after the outage month closes.
- How are subscribers told? With the credit note, by e-mail.
If your service agreements already promise credits for downtime, the policy simply puts those promises into practice.
After the next outage
Build the list of affected subscribers from your network records, have it approved, and credit the service line on each of their outage-month invoices. Then check the age analysis the following week. Before e-mailing a large batch of credit notes, make sure your e-mail settings are working, as described in knowing a subscriber actually got the invoice; for subscribers who pay online, how online subscriber payments reach the books explains how their earlier payment was recorded.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
