Learn how to write off bad debt in QuickBooks Online.
Bad debt means a customer owes you money but you can't collect it. They have a debt with you, but you know you aren't going to get paid. If your business uses accrual method accounting, you can sometimes write off bad debt 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.
Select the method that’s most appropriate for your company.
- Go to the Invoice and click Receive payment.
- In the receive payment screen at the bottom tick the adjustment note created as per Step 4 and save the payment.
What if a customer pays an invoice I already wrote off?
If a customer pays an invoice or an amount that you wrote off, you just need to void the adjustment note and the journal entry (for Allowance method) to restore the accounts receivable so you can pay it off.
Note: If you wrote off the bad debt in a prior year, talk to your accountant before making any changes.
- Go to the Sales menu, then select Customers.
- Select the customer’s name.
- Find and open the adjustment note you want to undo.
- At the bottom, select More, and then Void.
- Confirm you want to void the adjustment note.
- Go back to the Sales menu, then select All Sales.
- Find and open the journal entry you want to undo.
- At the bottom, select More, and then Delete.
- Confirm you want to delete the journal entry.
You can now record the payment for the invoice as you normally do.
|Note: You can tell a bad-debt entity apart from your other customers by adding a note to their name:|