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NIPPAERO
October 18, 2024
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Shop Paid Repair Work for Customer

  • October 18, 2024
  • 2 replies
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I own a repair and maintenance shop. We recently repaired customers vehicle at our own expense. We had about $4,000 in parts and $20K in labor expenses. I would like to give a detailed invoice to the customer showing that our shop paid these expenses and he owes $0. What is the best way to go about doing this? Are we able to write off these expenses? Would this be considered bad debt?

Best answer by Rainflurry

@NIPPAERO 

 

The advice given by @MariaSoledadG won't give you an invoice that you can give to the customer that shows the shop covered the costs.  IMO, the best way to handle this is to create a service item called "Shop Covered Cost" (name it whatever you want the customer to see on the invoice).  When setting up the service item, select Bad Debt Expense under 'Income account' (set up a Bad Debt Expense account if you don't have one).  Then, add that item to the customer invoice as a negative amount to zero out the invoice.  That will give you an invoice that you can give to the customer that shows the shop covered the costs.    

2 replies

MariaSoledadG
MariaSoledadG
October 18, 2024

QuickBooks Online (QBO) provides several options to handle this situation. If want to write off the amount as bad debt to track a record of the expenses, ensure that you have already created an invoice. Allow me to guide you through with the process, Nippaero. 

 

First, review the invoice that should be considered as bad debts using the Accounts Receivable Aging Detail report. I've added the steps below:

 

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

 

Once done, create a bad debt expense account. Here's how:

 

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

 

If you haven't already, create a  non-inventory item where you can hold for the bad debt. Please know, this isn't a real item, it's only to balance the accounting. Below are the illustrated steps for reference:

 

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

 

After that, enter a credit memo for the bad debt and then, apply it to the invoice. This will now show a zero amount on the invoice and you can send a copy to your customer.

 

Finally run an Account QuickReport to check all the receivables as bad debt. To give you more information and detailed steps on the process, I've included this article for reference: Write Off Bad Debt in QuickBooks Online.

 

The second option is to create a discount  where you can use this to offset the amount on the original invoice to show it in zero amount.

However, I still recommend reaching out to your accountant to guide you on the best way on how to accurately record this in QuickBooks.

Additionally, QuickBooks offers several reports that can show your business information including bad debts. You just need to filter the specific information correctly to get the right data at the right place. To help you with this, I encourage you to read this article for additional insights: Customize Reports in QuickBooks Online.

 

For any other queries or questions regarding bad debt, the Community is always the right place for your to cover all your concerns. Have a nice day!

Rainflurry
RainflurryAnswer
October 18, 2024

@NIPPAERO 

 

The advice given by @MariaSoledadG won't give you an invoice that you can give to the customer that shows the shop covered the costs.  IMO, the best way to handle this is to create a service item called "Shop Covered Cost" (name it whatever you want the customer to see on the invoice).  When setting up the service item, select Bad Debt Expense under 'Income account' (set up a Bad Debt Expense account if you don't have one).  Then, add that item to the customer invoice as a negative amount to zero out the invoice.  That will give you an invoice that you can give to the customer that shows the shop covered the costs.    

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