Write off (A/R), old unpaid invoices

Writing off old unpaid invoices is easy, Charm25. We'll use the Credit memo feature. I'd be glad to show you how.

If the invoices you send through QuickBooks are no longer collectible, you can classify them as bad debts and remove them from your records. This process helps keep your accounts receivable and net income accurate. Here are the steps to write off invoice balances.

To start, let's run the Accounts Receivable Aging Detail report. Doing so helps us review all your invoices that should be considered bad debt. I'll show you how:

1. Go to Reports.
2. Find and open an Accounts Receivable Aging Detail report.
3. Check which outstanding accounts receivable should be written off.
   
   

Then, create a Bad debts expense account:

1. Go to the Gear icon and then select Chart of accounts.
   
   
2. At the upper right, click New to create a new account.
3. From the Account Type dropdown, choose Expenses.
4. From the Detail Type ▼ dropdown, select Bad debts.
5. In the Name field, enter Bad debts.
6. Hit Save and Close.
   
   

Next, if you haven't already, create a non-inventory item as a placeholder for the bad debt. It isn't a real item, it's just to balance the accounting:

1. From the Gear icon, select Products & services.
   
   
2. At the upper right, click New, and then Non-inventory.
3. In the Name field, enter Bad debts.
4. From the Income account ▼ dropdown, choose Bad debts.
   
   
5. Hit Save and Close.
   

After that, create a credit memo for the bad debt:

1. Go to + New and then select Credit memo.
   
   
2. Choose the customer from the Customer ▼ drop-down.
3. From the Product/Service section, click Bad debts.
4. On the Amount column, enter the amount you want to write off.
5. In the Message displayed on statement box, enter Bad Debt.
   
   
6. Hit Save and Close.

Once done, apply the credit memo to the invoice:

1. From the + New, select Receive payment.
   
   
2. Choose the appropriate customer.
3. From the Outstanding Transactions section, add the invoices.
4. From the Credits section, select the credit memo.
5. Hit Save and Close.
   
   
6. The uncollectible receivable now appears on your Profit and Loss report under the Bad Debts expense account.

For more details about the process, please see this article: Write off Bad Debt in QuickBooks Online.

If you have any further concerns about tracking the transactions, please don't hesitate to post them here. I'm always ready to assist you. Have a great day!

@Charm25 

@CharleneMaeF 's response only applies if you're on accrual basis.  If you're on cash basis, zero out the old, unpaid invoices since they were never recorded as income.  

Thank you.. Yes, it's a cash basis.. How can I zero out if the books were already closed. Should I create a credit memo instead to offset the unpaid invoice? 

Thank you. This is a cash basis accounting method. 

Thank you. It really makes sense..  

Hi.. Last question.. 

Write off feature in qbo is use for accrual basis only?

Then, for cash basis it is better to zero out invoices and if dont have access to change the invoice, better to use credit memo with income classification to zero out? 

Hi.. Last question.. 

Write off feature in qbo is use for accrual basis only?

Then, for cash basis it is better to zero out invoices and if dont have access to change the invoice, better to use credit memo with income classification to zero out? 

What if it is cash basis and  partial write off. For example the customer never payed off balance?  The example I am seeing zero it out for full write off. What should we date should be used current date or same date as the  write off.  Also, if it is a credit is used should we back date. Please explain in detail. Thanks

Hello Rainflurry,

Thank you for sharing your input to help address the issue. We love to see members supporting one another! Have a great day. 

What if they are older and partially paid invoices?  In our world there are often unpaid balances (small dollar), We are on a cash basis and want to clean these old invoices up.

Should I zero the out the whole invoice?  Seems like we were partially paid I should zero the balance of what's outstanding not the whole invoice

I appreciate you joining this thread, kkbmar. Let me share information to help you write off old and partially paid invoices in your online account.

With QuickBooks, you may consider creating credit memos for the remaining unpaid balances from the invoice. The steps shared by my colleague, CharleneMaeF above, have similar processes when writing off customer invoices that were paid partially. Thus, it's best to run an Accounts Receivable Aging Detail report to help you review all bills that are considered bad debts. To do this:

1. Go to Reports and enter the Accounts Receivable Aging Detail report from the search section.
2. Check which outstanding accounts receivable should be written off.

Once reviewed, you may follow Steps 2 & 3 outlined in this article when creating a bad debt expense account and item: Write off bad debt in QuickBooks Online.

Once done, enter the remaining amount balances from an invoice when creating credit memos for the bad debt. You may refer to the steps below:

1. Go to the + New icon and select Credit memo.
2. Choose the customer from the Customer ▼ dropdown.
3. In the Product/Service section, select Bad Debts.
4. Under the Amount column, enter the remaining balance to write off.
5. In the Message displayed on statement box, enter “Bad Debt.”
6. Then, select Save and Close.

Moreover, you can run specific reports to help review your business finances and other accounting data.

I'll keep this thread available if there's anything else you need further assistance with when managing sales transactions in your account. Just let me know, so I can provide additional help. Keep safe!

RE: Write off (A/R), old unpaid invoices

For the Cash Basis wouldn't you still complete most of the steps in @CharleneMaeF 's response except for the last step to select Receive payment?  

If not could you please list the steps for the Cash Basis. Thank you. 

Thanks for joining the thread, @angelacct. 

Instead of receiving payments from your customers, you can issue a credit memo. By this, we can apply the credit amount to their invoice, which will show up as a return in their account. By doing this, you can clear the amount from your accounts receivable and reduce your net profit.

Here's how: 

1. Select + New.
2. Select Credit memo.
3. From the Customer dropdown, select the customer's name.
4. Enter the credit memo details, such as the date and the amount.
5. Once done, select Save and close.

After creating the credit memo, it can be applied automatically to your invoices depending on if you've turned the settings on. Otherwise, here's how we can manually apply them to your invoice: 

1. Go to + New icon, then select Receive payment.
2. From the Customer dropdown, select the customer.
3. In the Outstanding Transactions section, select the open invoice you want to apply the credit memo.
4. In the Credits section, select the credit memos you want to apply.
5. For the open invoice in the Payment column, enter how much of the credit you want to apply.
6. Leave the Payment method, Reference no, Deposit to, and Amount received fields blank.
7. Fill out the rest of the form and ensure the total is correct after applying the credit memo.
8. Once done, select Save and close.

Furthermore, you'll want to check this article and learn how and when to give a credit memo or delayed credit to customers: Create and apply credit memos or delayed credits in QuickBooks Online.

Additionally, you can refer to this article for future reference if you want to learn how to personalize and add specific info to your sales forms: Customize invoices, estimates, and sales receipts in QuickBooks Online.

I'll leave this thread open for your comment if you need additional assistance managing your invoices in QuickBooks Online. Stay safe.

Thank you so much for the information, I really appreciate it. 

Hi there, @angelacct.

I'm glad to see that my colleague was able to help you resolve your issue. Rest assured, we'll continue to provide you with quality customer service.

If you have further QuickBooks concerns, feel free to come back here. I'll be willing to lend a hand. Keep safe and have a great day!

@angelacct 

QB Employees don't understand proper accounting and it's clear by their responses that they really shouldn't be giving advice on how to handle this.  On cash basis, you have two options for uncollectible invoices:

1) Zero out the invoice.

2) Create a Credit Memo with an item linked to an income account, not an expense account.

You don't want to use an expense account like Bad Debt Expense on cash basis because that will increase your revenue with an offsetting expense.  Although the bottom line is the same, you don't want to show revenue from uncollectible invoices on cash basis. 

I just realized that you had already answered that "zeroing out the invoice" is the best practice for cash basis.

Thanks so much for taking the time to answer the same question again. I really appreciate it.