How do I record no payment or clients that dont pay their bills as a loss in my quickbooks

Hey Silvia Armitage,

You can set up the item "Bad Debt" in whichever way works best for you. This is personal preference, and something you may want to run by your accountant. You can set this up as a non-inventory item, or even as "other charge". I want to make sure you get the best advice possible, so consulting your accountant is the best thing to do in this scenario. 

I hope this helps.

Cheers!

I work in construction for a general contractor and we have this happen at least once a year.  In all actuality, say you bid the job at $2000, it actually costs $5000. You only invoice your customer the $2000 because that was the quote. The customer pays and you post the $2000. That's all - run the "profit & loss by job" report and it should show you your true loss if your items are set up correctly.   You should be showing a negative under Net Income for that job (if it was indeed a loss).  Be sure your dates for the report cover the time frame , to be safe I always make mine "This Fiscal Year". The report will pick up on all payroll expenses, payroll taxes, fuel expenses, etc. that have been allocated to that job.   

I tried setting up an account as other charge for a lost invoice.  Quickbooks is picking it up as a credit and is asking me to issue a credit memo.  It does not seem correct.

Hello Shmet,

I can appreciate wanting to make sure you're getting these steps right in your books. I've reviewed what was said above by other users and with what they're saying, the credit that's created by this process would be applied to the invoice to close it out. This would then also write off the bad debt.

If that process doesn't quite work for you, I encourage you to check out the following, brief article about another way to do this in the program: Write off bad debt in QuickBooks Desktop

QuickBooks Desktop also has great in-product articles that can be accessed by going to the Help menu, choosing QuickBooks Desktop Help, then the Help tab, and Search button. Use keywords such as "bad debt" to find articles related to this.

I hope that helps!

You can't claim a loss for something you did not collect.  

You could create a "discount" account and show it as a discount given to a client.  That way you will have a running tab of all the savings you gave away during the year. 

Again, it is not deducted from your income because you never actually had that money.  But this way it would give you some kind of a record so you are aware of your potential profits would have been. 

Go to ITEMS and click + for a new item line.
Under TYPE choose Discounts
Under RATE choose a specific $ amount or a % amount. 

You can create an ACCOUNT called "UNDERESTIMATES" and show it as an expense - then put any discount created under that as a SUB-ACCOUNT

This is just an idea. I give discounts to seniors and students on products purchased and have created a "DISCOUNT" item line just so I have a personal record.  Again, I do not claim this on my taxes because it is not money earned but potential money earned.  There may be a better way to record this but it allows me to create an invoice for the customer, showing the retail price of the items purchased and discount given.

How do I "Create a credit for the customer and use the Bad Debt item."

I only see that I can create a credit Memo for the customer that did not pay, but I can't use any item in the credit memo, I can only select a Product/Service.

But I would love to get rid of these items in the Overdue since they will never be paid.

If applying the invoice to Bad Debts, does the HST applied get reversed as well? 

Hi Christine:

This is a really good question!  I read a few different accountants blogs and here's what they had to say on the matter:

You can recover the HST on a written off bad debt; however, knowing that the CRA may challenge your assertion that the debt is bad, you may wish to maintain a log of attempts made to collect the money.  Generally good items to have on your list as proof are:

* records of phone calls made to attempt collection with date, time, and who you spoke to

* records of collection notices or statements sent to the customer, again with dates associated

* records of any legal routes taken; small claims court, etc.

Not that documenting the bad debt should cost you a bunch of money on an already bad debt, but having a tidy record of the attempt in collections can prevent a headache later on.

Hi I was wondering if you could put me in the right way to pay a missed payment 

I create a line item on the past due invoice (I use the generic "Sales" account) and put a negative quantity of one dollar (less 5% GST) to balance out the invoice. E.g., if they owe you $100, then your quantity is -95.24 and tax code is GST.

DO NOT DO THIS IF YOU COLLECT PST IN BC. You're required to submit the PST you charge, even if you never collect. A friend of mine is a lawyer and has to judge how much to charge if they think the client will stiff them because they're liable for the PST in any case.