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Level 1

How to write off bad debt...the correct way? QB Mac 2014

I'm trying to write off bad debt - a customer that hasn't paid, after exhaustive efforts, and we will write off.

Searching previous questions, I see two options...

#1

  • Go into "receive payments" window
  • Type customer in box "customer:job" 
  • Click invoices in the "outstanding invoices/statement charges" that you want to record as bad debt.
  • Click "discount info"
  • Enter the total you want to write off under the "discount (in dollars)" and then enter the bad debt expense account under the "discount account" box.

#2

  • Go into "refunds & credits" window
  • Type customer in box "customer:job" 
  • Enter item # you created for bad debt  (need to create a "bad debt" item number before doing this step - linked to bad debt expense account)
  • Enter amount of bad debt in the "amount" box and then click "save"
  • Then, close out of the "refunds & credits" window
  • Go into "receive payments" window
  • Type customer in box "customer:job" 
  • Then check the box next to "apply existing credits?"
  • Click "save"

My question is, both seem to do the job but not sure if there are advantages/disadvantages to either and if one was is right or wrong. It seems like the general consensus is #1 but then some say it is not the right way to go about it. Would greatly appreciate some input!

Solved
Best answer 12-10-2018

Best Answers
Level 15

How to write off bad debt...the correct way? QB Mac 2014

#1 creates Bad Reporting; I titled it Out Of Balance and attached an image for you to see it. It doesn't allow you enough controls and you cannot get to it later to change it.

#2 is the better option and gives you control. It uses an item, so you also get to control that Item, the account links, the reversal of Sales taxes if applicable. You also get to use a real date on this transaction.

View solution in original post

18 Comments
Level 15

How to write off bad debt...the correct way? QB Mac 2014

#1 creates Bad Reporting; I titled it Out Of Balance and attached an image for you to see it. It doesn't allow you enough controls and you cannot get to it later to change it.

#2 is the better option and gives you control. It uses an item, so you also get to control that Item, the account links, the reversal of Sales taxes if applicable. You also get to use a real date on this transaction.

View solution in original post

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Level 1

How to write off bad debt...the correct way? QB Mac 2014

I went to Credit & memo's, I entered my bad debt item, then the amount of bad debt in the "amount" box then noticed the amount went negative, clicked "save". But wouldn't because it was a negative credit. Message said I should "use the Create Invoice window".  Why is this so hard to do.  This should be real simple!
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Level 8

How to write off bad debt...the correct way? QB Mac 2014

Option #2 shows a transaction in the customer account.

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Level 2

How to write off bad debt...the correct way? QB Mac 2014

Either method you use marks the invoice as paid - that's crazy!  Is there any method that marks it as written off?
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Level 15

How to write off bad debt...the correct way? QB Mac 2014

"Either method you use marks the invoice as paid - that's crazy!  Is there any method that marks it as written off?"

It is Written Off, because your accounting shows, for example:

$500 Sold

-$500 Written off

= $0 Net


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Level 2

How to write off bad debt...the correct way? QB Mac 2014

Thank you for your answer but it is not addressing my issue so I need to respond to your comment.  I am not talking about the accounting aspect.  I am talking about the pure misrepresentation of the "Paid" stamp showing up on the invoice when it has been written off.  It makes it look like the client paid that invoice which is 100% not the case. I know that it is written off and I see it went to the right accounts and I see the $0.00 at the bottom of the invoice when I write off an invoice and then I see the misrepresentative "Paid" stamp on the invoice.  It should not say "Paid" and should say "Written Off".  If you use method 2, it says Payment on at least one of the reports and Discount on another - also misrepresentative.  The "Credit Memo" method also does not represent that it is a bad debt either.  Using the journal entry method does not tie into the invoice. I called QuickBooks support about it and spent an hour on the phone with someone who kept trying to tell me how to do write-offs insead of addressing my pretty specific obvious concern.  Once he understood my concern, he elevated it to another person. She agreed that it was built into QuickBooks and that I wasn't missing some step to get it to say something besides the erroneous "Paid".  She suggested I send them feedback so their product developers could perhaps add it as a new feature.  I also created  a "Bad Debt" Class and will populate the field for it for every invoice I write off. That way "Bad Debt" will show on the screen.  I also wrote on the top line of the invoice that "THIS IS NOT PAID, IT IS WRITTEN OFF." Perhaps this comment will help someone else when they do their first write-off and are surprised at the “Paid” stamp. Perhaps I can save them some time from pursuing it because there is absolutely nothing that can be done about it as it stands right now. No one needs to respond to me that it is not a big deal and don't worry about it.
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Level 15

How to write off bad debt...the correct way? QB Mac 2014

"Why can't we customize the status stamps?  And why are we limited to "Pending" and "Paid" for invoices?"

Pending invoices were replaced by using Estimates, about 15 years ago.

"You've provided a work-around to the limitations of QuickBooks - but we want those limitations removed!"

This is not Live Chat with Intuit support. You are posting on the internet in a forum with peer users. We all have things we do that makes this work for us, and we share the functions that work for us.

"We can "customize" job statuses - by changing their labels!  But we can't *really* customize them at all - we're stuck with five whether we need more or not."

That is from the original "list" concepts and has never even been moved to the Lists menu.

"Template "customization" is really just a highly limited way of maybe making your form *look* a bit nicer - but not making the form *actually* more useful."

I would disagree with this. It is how to reveal, hide, arrange, use, or don't use, anything that is available and is one of the most powerful tool for managing your Transactions.

"Coming back to your suggestion, "removing" the paid status means TURNING OFF a QB "feature" and inventing a work-around, and that is a far cry from actually *customizing* that feature to "meet our specific needs".  See the difference?"

You can use Help menu > Send Feedback, if you need to communicate to Intuit. We are your peer users; of course, we know the difference, but we are no more the programmers than you are the programmer.
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Level 15

How to write off bad debt...the correct way? QB Mac 2014

It states PAID because this = Closed.

Don't get stuck in Semantics. If you use the Credit Memo method, then for that customer, you see Invoices and Credit Memos = you know this activity has taken place.

There is no way a total 0 offset by a credit memo is known to be "applied your prepayment" or "wrote off your balance" so I don't understand why Paid is not good enough to prove this = $0. The same is true for Bills. Paid by Vendor Credit, Paid by Check, Paid by credit card = 0 and Done.

"I also wrote on the top line of the invoice that "THIS IS NOT PAID, IT IS WRITTEN OFF." Perhaps this comment will help someone else when they do their first write-off"

Yes, change that invoice to your Own Template, which you can Title a Write Off and REMOVE the paid status for the customization of that specific invoice.

"because there is absolutely nothing that can be done about it as it stands right now."

That is not true. You can control this.



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Level 2

How to write off bad debt...the correct way? QB Mac 2014

Geez.
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Level 15

How to write off bad debt...the correct way? QB Mac 2014

Geez, what? You finally hit the answer to your own question: Use an invoice where you removed the Paid status from your print options. Use a Title that is meaningful to you. That is Why we get to Customize and save these as our own templates = to meet our specific needs.
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Level 1

How to write off bad debt...the correct way? QB Mac 2014

Geez as in "remove the Paid status stamp" but NOT REPLACE it with a different, meaningful stamp? Why can't we customize the status stamps?  And why are we limited to "Pending" and "Paid" for invoices?  You've provided a work-around to the limitations of QuickBooks - but we want those limitations removed!  And QuickBooks has SO MANY limitations!  Intuit REALLY needs to start programming a version from scratch, starting with making it 64-bit so its no longer limited to one processor core/thread!  Instead we are stuck with incremental "improvements" that are really just Band-Aids slapped on top of an ancient underlying program architecture.  Let's face it, the latest, greatest version of QuickBooks is still just a fancied up version of the basic program released over 25 years ago!

I'm sorry for my rant, but all these limitations and workarounds are ridiculous.  We can "customize" job statuses - by changing their labels!  But we can't *really* customize them at all - we're stuck with five whether we need more or not.  (My business would really benefit from at least 7 or 8!)  Template "customization" is really just a highly limited way of maybe making your form *look* a bit nicer - but not making the form *actually* more useful.  Coming back to your suggestion, "removing" the paid status means TURNING OFF a QB "feature" and inventing a work-around, and that is a far cry from actually *customizing* that feature to "meet our specific needs".  See the difference?
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Level 2

How to write off bad debt...the correct way? QB Mac 2014

If anyone is still watching this one...

 

I noticed that as I was writing off bad debt the credit memos were accounted as income on my P&L report. 

 

I used the approved QB "write off" method shown here:

https://quickbooks.intuit.com/community/Help-Articles/How-to-write-off-bad-debt/td-p/187834

 

This just does not seem right. Am I right?

 

 

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QuickBooks Team

How to write off bad debt...the correct way? QB Mac 2014

Hi there, Newman1.

 

Thank you for reaching out to us and following the steps provided on the article. I can help you more in recording the bad debt.

 

You have to make sure to select an expense account when creating bad debt. This is for the credit memos not to be under income.

 

If you've already verified the account type and the P&L report is still showing wrong information, I'd recommend reaching out to your accountant. Since all businesses are unique, they can ensure the correct account is used and to provide additional guidance.

 

Keep me posted if there's anything else you need from me. I'm here to offer more help for you. Have a wonderful day ahead.

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Level 15

How to write off bad debt...the correct way? QB Mac 2014

@HoneyLynn_G

 

Please Learn from the input here.

 

The best reference for the chart of accounts is the Tax form this entity files. You see One Line for Income and One Line for Allowances (refunds, returns, write offs) in this Income section. This guidance is Not a given: "You have to make sure to select an expense account when creating bad debt. This is for the credit memos not to be under income."

 

Write Offs are typically an income account that only and always runs negative. That is called Contra-Accounting, or Backwards, because that is what we report for taxes. You see this on many Sales tax settlement forms, as well = negative sales.

 

@Newman1

 

Yes, you might be seeing Both the income and the write off, for the same date as the Credit Memo, under the conditions of Basis. Let's review Cash and Accrual Basis:

If this is an invoice from Dec, and you are an Accrual Basis entity, you reported $20,000 income, even though it was not yet paid. If you Credit memo dated in Jan, you see the negative $20,000.

 

If this is a Cash Basis entity, the Income never even shows until the invoice is Paid. So, it doesn't matter how old or the date on the invoice. the Credit Memo becomes the "paid in lieu of funds" activity and the CM date, in the reporting, will then reveal the Invoice and the Credit memo and they wash away to 0. You don't see More write off. You only see the Wash Away from both Details.

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Level 1

How to write off bad debt...the correct way? QB Mac 2014

I followed all these steps for bad debt and the "bad debt" doesn't show on my P&L Statement. This is so frustrating. Help anyone?????

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QuickBooks Team

How to write off bad debt...the correct way? QB Mac 2014

Hello there, @Lola1234.

 

Thank you for joining this thread. I can help you sort out your P&L report.

 

On the Step #3: Creating a non-inventory item for bad debt, make sure that you've selected the Bad Debt expense account. You have to set up and map the account correctly so it'll reflect on the P&L report.

 

When running the P&L report, make sure to customize the report's date range.

 

After trying this, be sure to let me know how this works for you, Lola1234.

 

I'm still here to help you further if you have additional question about bad debt. Just click the "Reply" button or mention my name. I'll wait for your response.

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Level 2

How to write off bad debt...the correct way? QB Mac 2014

The part that really urked me was I would go to an invoice and it would be marked PAID and it actually was credited because they didn't pay..but I couldn't recall that so I'd keep hollaring at my husband why is this invoice in QuickBooks marked PAID when you said they didn't pay? We'll probably because I'd already don't a credit on it a long time ago (to make it zero since I didn't know how to make it bad debt) and yet the invoice should now read something slightly different than PAID to a avoid arguing with husband over thing you did ..thanks quick books!

 

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QuickBooks Team

How to write off bad debt...the correct way? QB Mac 2014

Hello, @LW2.

 

When a customer doesn't pay an invoice, it can be recorded as a bad debt. You can follow the advice provided by @qbteachmt in recording bad debts in QuickBooks.

 

Also, you can run and customize the Transaction Detail report. This report lists individual transactions, showing each account involved in a transaction on a separate line.

 

Here's how:

     1. Go to the Reports menu.

     2. Choose the Custom Reports.

     3. Select the Transaction Detail Report.

     4. Click the Customise Report button.

           a. From the Filter tab, locate the Transaction Type.

           b. Pick Invoices and Payments.

           c. Click Ok.

 

Lastly, I'd suggest consulting with an accountant so you'll be assisted in reviewing your transactions accurately.

 

Let me know if you have other questions. I'm always here to help.

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