Here is how you can write off bad debts in QuickBooks Desktop
QuickBooks Accounting software has garnered widespread and astonishing popularity amongst small and medium-sized businesses because of the various advanced features and tools it has on offer. It employs standards of unmatched quality to ensure that the data which is entered in the software is completely secured. In this comprehensive post articulated by our diligent experts, we will discuss elaborately the process of writing off bad debts in QuickBooks desktop.
Bad debts constitute one of the most prominent and conspicuous issues that any organization may encounter. This is why all businesses want to ensure that they can write off their bad debts as soon as possible and without facing any obstructions. And this is where QuickBooks Desktop Accounting software comes into the picture. This impeccable software can conveniently write off bad debts. So, let us dive into the various aspects of the process.
You may also like: Steps to Set up Multi-User Network in QuickBooks desktop
Important points to note
Before we embark on the process to write off bad debts in QuickBooks, you need to take note of the following points:
- You can write off bad debts as deductions also.
- Upon creating the bad debt account, you can get acquainted with all the different types of bad debts and unpaid invoices.
- There is an easy avenue to write off overpayments as well by utilizing the QuickBooks software.
What is the need to write off bad debts in QuickBooks?
In any organization, when the amount which was in the lucrative form and was supposed to be received from the customer fails to be recovered, it is termed Bad Debt. For those organizations that are already using QuickBooks Desktop, bad debts can be understood as invoices that become uncollectible over the course of time.
Writing off bad debts makes it convenient for an organization to track its profit and the average net turnaround. Although, the same can become quite tedious as well if the records are to be handled and managed manually without the help of any accounting software.
How can QuickBooks Desktop help to write off bad debts?
QuickBooks Desktop software makes writing off bad debts relatively easy as it is dedicated cloud-based accounting software. So, any organization, whether big or small, does not need to bother about hiring an Accountant for managing their finances as the QuickBooks software is highly user-friendly.
Methods to write off bad debts in QuickBooks Desktop
Following are some of the methods which the users can follow in order to write off the bad debts using QuickBooks desktop without any hassle:
Step 1: Create a Bad Debts Expense Account
- At first, you are required to launch the QuickBooks Desktop and move on to the settings option.
- Now, from the list of options, hit on the Charts of Accounts.
- Then, in the top-right corner, tap on New to create a New Account.
- Having clicked on New, the next step is to hit on Expenses from the Account type dropdown.
- Afterward, in the Detail Type dropdown, hit on the Bad Debts option.
- Once the above-mentioned steps are complete, you need to hit on Save and Close.
Step 2: Close out the unpaid invoices
- You are required to access the Customers menu and hit on the Receive Payments.
- Type in the customer’s name in the Received from field.
- In the Payment amount space, you need to enter $0.00 and choose Discounts and credits.
- Afterward, in the Amount of Discount field, put in the value that you would like to write off.
- For Discount Account, choose the account you added in the previous step, and hit on Done.
- Conclude it by choosing Save and Close.
These were some of the methods that you can employ to write off bad debts in QuickBooks Desktop software without any hassle. These methods are easy to follow and will aid you to get the process automated.
Steps to Write off bad debts in QuickBooks online
If you are using QuickBooks online, then you simply need to perform the below steps to write off bad debts in QuickBooks. Let us explore them one by one:
Checking aging accounts receivable
To check aging accounts receivable. the process is quite easy to implement and goes on as follows:
- To start off, you need to initially head to the reports menu.
- Furthermore, look for and open accounts receivable aging detail report.
- Also, check which of the outstanding accounts receivable should be written off.
Step 2: Creating a bad debt expense account
Create a bad debt expense account by performing the easy steps earmarked below:
- Herein, you simply have to move to the settings option and also choose the chart of account.
- Now, opt for new to create a new account.
- From the account type dropdown, choose expenses.
- Having implemented the previous step, now, from the detail type dropdown, choose bad debts.
- Conclude the step by selecting save and close options.
Step 3: Creating a bad debt item
- To create a bad debt item, initially, you need to move to the settings tab and then choose products and services.
- Within products and services, you need to choose the new tab and also opt for non-inventory.
- Furthermore, enter bad debts in the name fields.
- Moreover, you need to choose bad debts from the income account dropdown.
- Complete the process by opting for the save and close tabs respectively.
Related article: How to set up landed cost in QuickBooks Enterprise?
Step 4: Creating a credit note for the bad debt
- To create a credit note pertaining to the bad debt, you are simply required to choose +New.
- The next step requires you to opt for the credit note.
- Subsequently, you need to choose the customer from the customer dropdown.
- Now, in the product/service section, choose bad debts.
- You now have to enter the amount that you wish to write off in the amount column.
- In the message displayed on the statement box, you need to enter the bad debt.
- Lastly, choose the save button and the close tab.
Step 5: Applying the credit note to the invoice
- The process of applying the credit note to the invoice initially requires you to choose the +New option first
- Now under customers and choose receive payment choose the appropriate customer from the customer dropdown.
- Now, head for the invoice from the outstanding transactions section.
- Moreover, from the credits section, and also choose the credit note.
- Finally, hit on save and then close.
Step 6: Running a bad debts report
- To run a bad debt report, initially move to the settings ⚙ option.
- Then, head for the chart of accounts.
- Now, in the action column of the bad debts account, you need to choose run report.
Keep a note that, you can tell a bad debt entity apart from other customers by adding a note to their name:
- Proceed to the sales menu and also choose customers.
- You now have to choose the customer’s name and also hit on edit.
- Now, in the display name field, you need to enter bad debt or No credit after the customer name.
- Conclude the process by opting for the save option.
Final Words! Facing difficulties? Call us on our helpline
We hope you find this article helpful and informative. We also offer technical support to QuickBooks users. Therefore, if you cannot follow any section in this article due to some technical intricacy or are facing any other issues pertaining to the software, then reach out to us at 1-800-761-1787 for unmatched and time-effective solutions. Our support services are just a call away. So, without waiting any further, reach out to us.