How to Write Off Bad Debt in Quickbooks

hand-1248053_960_720If you recently sold a product or service but don’t expect the customer to pay, you’ll need to write this “bad debt” off in your respective accounting software. Thankfully, Quickbooks makes it handling bad debt such as this a breeze. In just a few simple steps, you can write it off so you aren’t forced to pay income taxes on it.

There are actually several different ways to handle bad debt in Quickbooks, one of the easiest being the cash basis method. Assuming you file your taxes on a cash basis, this is the best way to handle bad debt. To do so, log into your Quickbooks account and void the original invoice by choosing Customers > select the appropriate customer > Open Invoices > choose the date range > select the invoice > More > Void > confirm that you wish to void the invoice by clicking “Yes.” If you have multiple invoices that you with to avoid, repeat these steps and choose the appropriate invoice.

It’s a good idea to get into the habit of adding a memo to the voided invoice so you know it’s bad debt. Voiding an invoice doesn’t delete it, so you can still reopen it and add a memo. Go back into the voided invoice and enter “Bad Debt,” along with any other information that you wish to keep for reference purposes. When you are finished, click Save to complete the process.

But what if the customer paid part of an invoice? In this case, you’ll want to open the original invoice and enter a new line using the product or service. Next, change the description to “Bad Debt,” and under the amount field, enter the balance due in the form of a negative number. If the customer owes $300, for instance, enter “-$300” in the amount field. Click Save to complete the process.

You can also make a note of a customer’s bad debt by accessing Customers > choose the customer from the drop-down list > Edit >  and in the “Display Name as” field, type “Bad Debt” or “No Credit.” When you are finished, click save to complete the process. This note will appear in lists and reports when you create a sales transaction in which the customer’s name is selected. It will not show up, however, in cash-only invoices with the respective customer.

Did this tutorial work for you? Let us know in the comments section below!

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