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Charm25
December 5, 2023
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Write off (A/R), old unpaid invoices

  • December 5, 2023
  • 4 replies
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Hi, I would like to know how to write off accounts receivable (old unpaid invoices)? Is it need to use the write off or credit memo will do? Thia is for a small business owner. LLC. Thank you in advance. 

Best answer by Rainflurry

@Charm25 

 

You can zero out the invoices if you have access to make changes to prior, closed periods.  Since you're on cash basis, those entries were never on your balance sheet or P&L so zeroing them out will not impact any cash basis closed period.  It will affect any prior period accrual basis reports.    

 

If you don't have access to make changes, then, IMO, you should create credit memos that offset the revenue on the invoices, not create an offsetting expense.  On cash basis, when you apply a credit memo to an invoice, QB increases your revenue based on the invoice amounts and then offsets that with whatever accounts are assigned to the Product/Services on the credit memo.  If you assign an expense account to the credit memo, your revenue and expense will both increase, thereby offsetting.  That's correct for accrual basis but not cash.  On cash basis, you don't increase revenue, so the Product/Service on the credit memo should match the income accounts associated with the invoices.  That why it's easier to just zero out the invoices IMO.  Forgive me if you know all of this already.       

4 replies

C
CharleneMaeF
December 5, 2023

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!

    C
    Charm25Author
    December 5, 2023

    Thank you. This is a cash basis accounting method. 

    1
    19980
    May 20, 2024

    How to write off unpaid old account on my credit profile

    Rainflurry
    Rainflurry
    December 5, 2023

    @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.  

      C
      Charm25Author
      December 5, 2023

      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? 

      Rainflurry
      RainflurryAnswer
      December 5, 2023

      @Charm25 

       

      You can zero out the invoices if you have access to make changes to prior, closed periods.  Since you're on cash basis, those entries were never on your balance sheet or P&L so zeroing them out will not impact any cash basis closed period.  It will affect any prior period accrual basis reports.    

       

      If you don't have access to make changes, then, IMO, you should create credit memos that offset the revenue on the invoices, not create an offsetting expense.  On cash basis, when you apply a credit memo to an invoice, QB increases your revenue based on the invoice amounts and then offsets that with whatever accounts are assigned to the Product/Services on the credit memo.  If you assign an expense account to the credit memo, your revenue and expense will both increase, thereby offsetting.  That's correct for accrual basis but not cash.  On cash basis, you don't increase revenue, so the Product/Service on the credit memo should match the income accounts associated with the invoices.  That why it's easier to just zero out the invoices IMO.  Forgive me if you know all of this already.       

        K
        kkbmar
        February 1, 2024

        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

        F
        FateCandylaneT
        February 1, 2024

        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!

          A
          ArielI
          May 1, 2024

           

          To zero out the open invoices, it's important to mark them as bad debt and write them off. Allow me to walk you through the process of writing off bad debt in QuickBooks Online (QBO), @customer12_2.

           

          First, you'll need to Create a bad debts expense account.

           

          1. Navigate to Settings and choose Chart of accounts.
          2. In the top-right corner, click New to add a new account.
          3. In the Account Type dropdown, select Expenses.
          4. Choose Bad debts from the Detail Type dropdown.
          5. Type “Bad debts” in the Name field.
          6. Click Save and Close.

           

          Then create a bad debt item, here's how:

           

          1. Access Settings and choose Products & services.
          2. Click New at the top-right, then select Non-inventory.
          3. Enter “Bad debts” in the Name field.
          4. Select the Bad debts option from the Income account dropdown.
          5. Click Save and Close.

           

          After that, you'll need to create a credit memo for the bad debt.

           

          1. Click on + New.
          2. Choose Credit memo.
          3. Use the Customer ▼ dropdown to select the customer.
          4. In the Product/Service line, pick Bad debts.
          5. Enter the amount you wish to write off in the Amount column.
          6. In the Message displayed on statement field, type in "Bad Debt."
          7. Click Save and Close.

           

          Then you'll need to apply the credit memo to the invoice. Here's how:

           

          1. Click on + New again.
          2. Under the Customers option, choose Receive payment.
          3. Use the Customer ▼ dropdown to select the relevant customer.
          4. In the Outstanding Transactions section, locate and select the invoice.
          5. In the Credits section, choose the previously created credit memo.
          6. Click Save and Close.

           

          For more detailed steps on writing off bad debt in QBO, you can refer to this article: Write off bad debt in QuickBooks Online.

           

          Moreover, regarding to concern about clearing the outstanding balance without increasing the revenue, please be reminded that you'll need to consult an accountant to ensure that everything is properly recorded and that the revenue remains unaffected.

           

          Additionally, you can get more hints while running your financial reports in our system, from these links:

           

           

          If you have further questions about clearing old invoices, you can comment below, and we'll respond to you as soon as possible.

          C
          Cbohn25
          February 3, 2025

          Can you do this "bad debt " for multiple invoices at a time, or you have to go one by one ? Thanks for this very useful information 

          J
          JeveeAdvin__la
          February 3, 2025

          Hi there, @Cbohn25.

           

          Yes, we can write off multiple invoices in QuickBooks Online if they are from the same customer so it's easier to manage outstanding balances. If the invoices are from different customers, you will need to handle each one separately, focusing on one customer at a time. I’ll guide you through each step of the process, giving you a clear understanding of each stage.

           

          Here's how:

           

          If you haven't already, create a Bad debts expense account.

           

          1. Go to Settings 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. Select Save and Close.

           

           

          Next, Create a Bad debt item.

           

          If you haven't already, create a non-inventory item as a place holder for the bad debt. This isn't a real item, it's just to balance the accounting.

           

          Then, Create a Credit memo for the bad debt.

           

          1. Select + New.
          2. Select Credit memo.
          3. Select the customer from the Customer ▼ dropdown.
          4. In the Product/Service section, select Bad debts.
          5. In the Amount column, enter the amount you want to write off.
          6. In the Message displayed on statement box, enter Bad Debt.
          7. Select Save and Close.

           

           

          Lastly, Apply the Credit memo to the invoice.

           

          1. Select + New.
          2. Under Customers, select Receive payment.
          3. From the Customer ▼ dropdown, select the appropriate customer.
          4. From the Outstanding Transactions section, select the invoice.
          5. From the Credits section, select the Credit memo.
          6. Select Save and Close.

           

           

           

          The uncollectible receivable now appears on your Profit and Loss report under the Bad Debts expense account.
           

          For your complete reference, refer to this article: Write off bad debt in QuickBooks Online.

           

          For your future reference on how to run your uncollectible invoices, refer to this article: Run a bad debts report.

           

          Clearing multiple invoices in QBO is streamlined when dealing with a single customer, helping you manage outstanding balances efficiently. If you have any additional questions, don't hesitate to reach out to us directly. I'm here to provide any assistance. 

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