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 into the software is completely secured. In this comprehensive post articulated by our diligent experts, we will elaborately discuss the process of writing off bad debts in QuickBooks Desktop.

Write Off Bad Debts in QuickBooks Desktop - Screenshot Image

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.

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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 a 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 to cloud-based accounting software. So, any organization, whether big or small, does not need to bother about hiring an Accountant to manage 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 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

The first step demands the creation of an expense account for bad debts. The walkthrough for the same is given below:

  • 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.
Create a Bad Debts Expense Account - Screenshot Image
  • Afterwards, 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 Any Unpaid Invoices

The steps to close unpaid Invoices in QuickBooks are illustrated as under:

Close out the unpaid invoices - Screenshot Image
  • 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.
  • Afterwards, 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.

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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 reports.
  • 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 the save and close options.

Step 3: Creating A Bad Debt Item

Follow the below-given set of instructions to create 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.

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Step 4: Creating A Credit Note For The Bad Debt

This next step involves the creation of a credit note specifically for the bad debt. For convenience, follow the directions given below:

  • 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.

Also see: Quick Troubleshooting Guide to Fix QuickBooks Error 1723

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.

FAQs

What is the allowance for bad debt in QuickBooks?

The allowance for doubtful accounts is an estimate of a company’s outstanding accounts receivable that is unpaid.

What does it mean to write off bad debts in QuickBooks Desktop and Online?

Writing off bad debts in QuickBooks Desktop and Online infers the process of acknowledging and removing uncollectible customer invoices or accounts receivable.

Can I recover or reinstate a written-off bad debt in QuickBooks?

Yes! If you recover a bad debt that was previously written off, you can reinstate it in QuickBooks. To do this, you would need to reverse the original write-off entry and record the recovered amount as a payment or credit against the customer’s account.

 

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