We can start by generating a report to determine which invoices are uncollectible, then write them off by applying credit to outstanding entries, Vani.
First, go to the Reports menu to run the Accounts receivable aging detail report to review your invoices and check which outstanding accounts receivable should be written off.
Second, create a bad debts expense account to track uncollectible receivables, ensuring financial statements reflect collectible revenue and the impact of unpaid invoices. Here's how to do that:
- Go to Settings and select Chart of accounts under the Your company column.
- Select New and enter the Account name (Bad debts).
- From the Account type ▼ dropdown, choose Expenses.
- From the Detail type ▼ dropdown, pick Bad debts.
- Hit Save.
Next, let's make a non-inventory item to record uncollectible amounts in your accounting system, serving as a tool to balance it by linking the bad debt expense to the affected invoice. Follow the steps below:
- Go to the Gear icon and select Products & services.
- Select New, then choose Non-inventory item.
- In the Name field, enter Bad debts.
- Tick the I sell this to my customers checkbox.
- From the Income account ▼ dropdown, select Bad debts, then Save and close.
Afterward, proceed to Steps 4- 5 of this article to create a credit memo and apply it to the invoice to zero out the transaction: Write off bad debt in QuickBooks Online. You can then use Step 6 to verify these entries and identify customers by adding a note to their name.
Return to this post if you require further assistance or have more questions about writing off invoices. I'm here to assist you, so don't hesitate to reach out.
