How to handle accounts sent to a collection agency?

"If they start paying, how do you apply payments?"

When you get paid, you use Deposit against the Asset account for Awaiting Collection.

"After setting up the Other Asset account for collections, when you are entering as Other Charge, do you link it in the Income Account"

You already have income from the Invoice.

This New Item is linked to the Other Asset account. That allows you to use it on the credit memo, to Close the AR balance (AR is a type of Revolving Asset by names) to a different Asset account (waiting for collection).

"and select " This item is used in assemblies or is a reimbursable charge?"

No; you don't need it to be Two Sided. It has One Account that it is linked to, and flows data to = Other Asset.

I still want track the individual customer account in accounts receivable-- just do not want it continue to charge a service charge or mail out a statement.  How do I stop those functions?

Thanks for visiting the Community and joining this thread, Joanne76. 

I'm here to lend a hand and stop the invoices to add service charges automatically. 

To start off, which QuickBooks version (is it online or desktop) are you using? The program ensures you have complete control with the transactions you send to the customers. The details in the invoices depend on which information you've initially added. 

It's possible the invoice was set as a recurring transaction, which is why the service charge is included. If you're using QuickBooks Online, you have the option to pause or delete the invoice. 

Here's how:

1. Go to the Gear icon, then select Recurring Transactions.
2. Locate the invoice with the service charge.
3. Click the Edit drop-down arrow at the far right side.
4. Choose Pause, or Delete.
5. Follow the prompt to successfully remove it (see screenshot below).

Meanwhile, if you're using QuickBooks Desktop, you can delete it from the Memorized Transaction list section. Here are steps to guide you through:

1. Go to Lists at the top menu bar, then select Memorized Transaction List. 
2. Locate the invoice you're referring to. 
3. Highlight and right-click on it.
4. Select Delete Memorized Transactions. 

For more details about recurring transactions in both versions, check out the articles below:

• Schedule recurring transactions created with a template (Online)
• Create and modify memorized transactions (Desktop)

Be sure to touch base with me here on the results of your testing or if you're referring to something different, I want to ensure this matter gets resolved. Have a great day! 

Let me give you a few more details.  We use the desktop version of Enterprise Solutions 19 rev. R5.

We have many customers who charge purchases on their customer account which they pay at a later date after we email or mail statements to them.  We charge a finance charge to these customers if they do not pay their bill within 30 days of their invoice date.  It is a percentage that is allowable by law.  We create an Invoice for all sales.  None of which are recurring.  Customer sales and invoices are tracked through their individual customer account.  All of these sales are kept under accounts receivable.  

When a customer becomes delinquent beyond our ability to collect the balance due, we turn the account over to a collection agency to assist in collecting the account.  At the time this happens we can no longer assess finance charges or send out statements.  

I have found that if I mark "none" in their customer account - payment options and when I print statements by "payment options" it will not generate a statement.  But I have yet to find any method to stop the system from assessing finance charges except by me manually telling it not to in the assess finance charges window.  This is very cumbersome and because we have hundreds of customers it is quite difficult and time consuming to review all our customers when applying finance charges.

I am looking for another way to mark certain customers to stop applying finance charges.  

Pretty simple request -- just not finding a method yet.  

Can you help?

How would you track the history of that individual customer?  It still is an accounts receivable -- until it is totally paid or determined un collectable.

Hello there, @Joanne76.

Thank you for providing a very detailed information to clarify your concern. I'm here to share some information on how to stop finance charges to customers and tracking history per customer.

At this time, you can individually mark customers' transactions which should not be applied with finance charges in the Assess Finance Charges section. Also, the Collection History button is the only way to track finance charge history of each customer. 

While the feature you need isn't available in QuickBooks Desktop, I encourage you to send feedback straight to our Product Developer Team to notify them of your suggested feature and I will do the same. It's one way we do to track QuickBooks usage and to let us see where our software is effective and what Intuit services help you manage your business most effectively.

Here's how:

1. Go to the Help tab.
2. Choose Send Feedback Online.
3. Select Product Suggestion.
4. Enter your request/product suggestion.
5. Click Send Feedback tab.

We truly appreciate feedback and suggestions and would love to incorporate them in the future updates.

For future reference, here's an article you may check out: https://quickbooks.intuit.com/community/Income-and-expenses/Assess-finance-charges/td-p/202647.

This information should get you on the right track with regards to disabling finance charges for customers. If you need anything else, please let me know by leaving a comment below. I'm always here to help. Wishing you and your business continued success.

After setting up the Other Charge Type item, the Collections account and creating the credit memo to move the funds, what should the process look like when I receive funds from the collection's agency? Example, I have customer ABC that owes use $225.00. I created the credit memo for $225.00 and applied it to ABC's outstanding invoice. What should be the next step(s) in QB Desktop when the collection agency pays the $225.00 to us?

Hello there, agreer.

Let's deposit the $225.00 from your account. This way, the balance from your account will be marked as zero. Here's how:

1. Go to Banking from the main menu.
2. In the Deposited To field, select the appropriate account.
3. Select the name of whom you received the amount.
4. In the From account column, select account you used for Other current assets.
5. Enter the balance amount.
6. Click Save and Close.

Get back to me anytime if you need further assistance with QuickBooks. Have a good one!

Are those instructions for QB Online or Desktop? I'm using QB Desktop.

Good afternoon, @agreer.

For QuickBooks Desktop the best option would be is to remove the credit memo due to it not being paid and create a journal entry once the funds have been received from the collections agency to resolve the balance. 

For further advice I would reach out to your accountant.

Here's how to create a journal entry: Create a journal entry in QuickBooks Desktop.

If you have any other questions about recording the transactions or anything else QuickBooks related, we're always here to help. Have a great day!

This is an old post but I'm hoping for clarification.  I followed the info above.  I was able to post off the invoice using the credit memo just fine.  When I go to Chart of Accounts, I go to Collections and see the invoice I posted off and when I run an A/R it is now gone.  My question is, shouldn't I see this Collections on the Profit and Loss? 

Hi, nancyl.

You're unable to see this collection in your Profit and Loss report since this offsets the amount if both invoice and credit memo has the same items. Although, there are some options that you can choose on how to handle credit in QuickBooks Desktop.

You'll want to retain it as available credit or give a refund. Here's an article that you can check out for more information and detailed steps: Give Your Customer A Credit Or Refund in QuickBooks.Desktop for Windows.

In case you'll want to add and match bank transactions, please visit this link for your guide: Add And Match Bank Feed transactions in QuickBooks Desktop.

If there's anything else that you want to help us with, let us know so we can get back.

I created a credit memo from the invoice and used the collections "item" for the total invoice.  I then posted off the invoice using the "Collections" account.  Now the only way to see the invoice I posted is from the Chart or Account and clicking on the "Collections" account.  Is this correct?

We don't do our banking with QB.  We use it to tracking sales and purchases only. 

The chances of them paying these invoices are slim to none! Some are 3 years old already. 

Thanks for getting back here in the thread @nancyl,

Let me share with you some ideas on how to record the unpaid invoices in QuickBooks Desktop. The process that you're doing will zero out the income. However, if the invoice will be unpaid you can follow the recording on how to write off bad debt. You can use the bad debt when the invoices you record in QuickBooks Desktop become uncollectible.

You can follow these steps on how to write off bad debt. Here's how:

Step 1: Add an expense account.
 

You'll need to add an expense account in your Chart of Accounts to track the bad debt.

1. Go to the Lists menu.
2. Select the Chart of Accounts tab.
3. Click the Account button, and then New.
4. Choose the Expense option, then Continue.
5. Enter an Account Name, for example, Bad Debt.
6. Select Save and Close.

Step 2: Close out the unpaid invoices

1. Go to the Customers menu.
2. Select Receive Payments.
3. Look for the customer in the Received from field.
4. Enter $0.00 amount for the Payment amount
5. Select Discounts and credits.
6. In the Amount of Discount field, enter the amount you'd like to write off.
7. For Discount Account, select the account (Bad Debt account) you added in step 1, and select Done.
8. Select Save and Close.

In case you'll need help pulling up and print Bad Debt report, you can visit this link for the steps: How to print a report for write off bad debt.

If you'll need further assistance, feel free to leave a message in the comment section. I'm always around here in the Community to help. Have a great day!

Here is my scenario.  I have an invoice for $2000.  I sent it to collections so I created an asset account in the chart of accounts called "in collections".  I created a product called called "sent to collections" and the income account selected was the asset "in collections".  I then created a credit memo using the product "sent to collections" for $2000. From the invoice I "received payment" and matched the invoice to the credit memo.  My problem is that this "payment" shows up on the profit and loss report under my income account and it also shows up on the balance sheet in the collections account I created.  How can it show up both places? I don't want to see it in the profit and loss since we didn't receive this money.  What am I doing wrong!?

Thanks for sharing your situation on this thread, Jennut77.

Let me share some additional information about the reports.

The Profit and Loss report will display your income, expenses, and net income (profit or loss). While the Balance Sheet shows what you own (assets), what you owe (liabilities), and what you invested (equity).

You'll want to check your accounting method if you're running the Cash or Accrual method. If you're using the Desktop version of QuickBooks, the option is available under Dates beside Report Basis. For QuickBooks Online, please check out this article: Choose between cash and accrual accounting methods in QuickBooks Online.

• Cash Basis: Only if paid, and Income for that date of payment and not the date of the invoice.
• Accrual Basis: Display as income for the date on the invoice, even if you Never get paid.

In case of a possible data damage, you can follow the solutions in this article to fix the report in QuickBooks Desktop: Fix data damage on your QuickBooks Desktop company file.

For the Online version, you can perform a browser troubleshooting. The instructions are included in this link: Troubleshooting browser problems.

Please let me know if you have any additional questions or need help with other concerns. I'll be around to give the solutions. Stay safe!

I am in quickbooks online and using cash base accounting.  I am still unclear how to best move the balance on  this unpaid invoice to the asset account I created.  I don't want to see it as income, or in my accounts receivable.  I want to send it to the asset account as we might see some payout later this year.  Thank you

I've got your back, @Jennut77.

You can create a deposit to move the balance from the unpaid invoice to the asset account. Then, delete the invoice so it won't show as income or an account receivable in your QuickBooks Online. Let me guide you through the process.

To create the deposit, please follow the steps below:

1. Click the + New button, then select Bank deposit.
2. Choose the bank account from the drop-down.
3. Go to the Add funds to this deposit section.
4. Select the customer from the Received From drop-down, then select the asset account you created in the Account drop-down.
5. Enter the amount and the necessary information.
6. Click Save and close.

I'm adding this article for more guidance: Record and make bank deposits in QuickBooks Online.

Once done, let's now delete the invoice. Here's how:

1. Click Sales from the left menu, then select Invoices.
2. Find and open the unpaid invoice.
3. Select More at the bottom and choose Delete.
4. Click Yes to confirm the action.

You can read this article for more details: Void or delete transactions in QuickBooks Online.

Also, if you need further assistance entering this, I suggest seeking help from your accountant. They may provide additional steps based on your recording practices.

You might want to review all your sales transactions made in QuickBooks Online. You can go to the Sales menu and select All Sales.

Our doors are always open to help you again if you have any other concerns or follow-up questions. Wishing you all the best, @Jennut77.

We also use cash basis. Could I add a new Collections product and asset account and then zero out the invoice by entering a negative (like I do with deposits/retainers) instead of deleting the invoice?