Advanced troubleshooting methods to write off Bad Debt in QuickBooks

The original invoice goes unpaid when a customer doesn’t pay a debt owed to your company. If you write off bad debt in QuickBooks, it makes it difficult to reconcile your accounts and run accurate reports. It means a customer owes your money but you can’t collect it. Before recording a bad debt, you should create an account for the purpose of tracking such transactions. By doing so, you can choose the Discounts and Credits option within QuickBooks to record the debt while keeping it organized in a separate register for tax purposes. Recording the bad debts into your regular customer register can make it more difficult to track the debt. 

Learn how to write off Bad Debt in QuickBooks Online

If your business uses the accrual method of accounting, you can sometimes write off bad debt in QuickBooks as a deduction. When invoices you send in QuickBooks become uncollectible, you need to record them as a bad debt and write them off. This ensures your accounts receivable and net income stay up-to-date. 

Step 1: Check your ageing accounts receivable

1. Navigate to Reports.

2. Locate and open an Accounts Receivable Ageing Detail report.

3. Check which outstanding accounts receivable should be written off.

Step 2: Create a bad debts expense account

1. Firstly, head to Settings and select the Chart of accounts.

2. In the upper right corner, choose New to create a new account.

3. From the Account Type dropdown, click Expenses.

4. Tap on Bad debts under the Detail Type dropdown.

5. In the end, hit Save and Close.

Step 3: Create a bad debt item

1. In the inception, move to the Settings tab and select Products and Services.

2. At the upper right corner, choose New, and then Non-inventory.

3. In the Name field, enter Bad debts.

4. Click on Bad debts, from the Income account dropdown.

5. Lastly, press Save and Close.

Step 4: Create a credit memo for the bad debt

1. Press select + New.

2. Choose Credit memo.

3. From the Customer dropdown, select the customer.

4. In the Product/Service section, click on Bad debts.

5. Under the Amount column, Enter the amount you want to write off.

6. Now, enter Bad Debt, in the Message displayed on the statement box.

7. Finally, you need to tap on Save and Close.

Step 5: Apply the credit memo to the invoice

1. To begin with click + New.

2. Under Customers, choose to Receive payment.

3. Now, select the appropriate customer from the Customer dropdown.

4. Opt for the invoice under the Outstanding Transactions section. 

5. After that, choose the credit memo from the Credits section.

6. Press Save and Close.

7. The uncollectible receivable now appears on your Profit and Loss report under the Bad Debts expense account.

Step 6: Run a bad debts report

You can run an Account QuickReport to check all the receivables you tagged as bad debt. To do this, follow the steps inclined below:

1. Go to Settings and select Chart of accounts.

2. Next, choose the Run report in the Action column of the bad debts account.

You can elaborate a bad-debt entity apart from your other customers with help of adding a note to their name:

1. In the beginning, move to Sales and select Customers.

2. Now, choose the customer’s name.

3. At the upper right, click Edit.

4. In the Display Name field, enter Bad Debt or No Credit once you are done with entering the customer name.

5. Ultimately, hit the Save button.

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Steps to Write Off Bad Debt in QuickBooks Desktop

Step 1: Add an expense account to track the bad debt

1. Under the Lists menu and select Chart of Accounts.

2. Now, go to the Account menu and then click New.

3. Choose Expense and then press Continue.

4. You need to enter an Account Name, for example, Bad Debt.

5. Hit on the Save and Close tab.

Step 2: Close out the unpaid invoices

1. In the commence head to the Customers menu and select Receive Payments.

2. Next, you need to enter the name of the customer in the Received field.

3. For the Payment amount, enter $0.00.

4. Click on Discounts and credits.

5. In the Amount of Discount field, type the amount you'd like to write off.

6. For Discount Account, choose the account you added previously, and press Done.

7. Tap on Save and Close.

Wrapping up!

Are you still unable to write off bad debt in QuickBooks? If yes then no worries. Although it's more cumbersome than simply deleting the invoice or issuing a credit memo that reverses the invoice, the methods outlined over here will help you to keep your records intact and give you important managerial information. Therefore, you are recommended to get in touch with our QuickBooks technical error support team in order to effectively and profitably run your business.