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Writing off old invoice balances

Forum|Forum|3 years ago
March 10, 2023
2 replies
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I need to write off some old invoice balances for one of our clients. Our company is cash basis. I've been looking on this site researching how to accomplish this and it appears I should create a credit memo. However, the instructions say to go to the "Customers" menu to do this. I do not have this - maybe my version of QB is newer? How do I do this? Thank you.

QuickBooks Online

Best answer by Rainflurry

@kellyr2

That's not a stupid question and I'm not sure my way is the best way. To zero out invoices, I change the amounts on all products/services to $0. If you delete the invoice, it would put any inventory items back in stock which you don't want. Then, I make a note (in the description field of each product/service or one of the message boxes) with the original invoice amounts. You can take a screenshot and save it as an attachment if you prefer. That way, if the customer ever comes back and can pay the invoice, you have a copy of the amounts.

J

JamesAndrewM

Hey @kellyr2, great to see you again. We can have this done with some easy steps.

If the invoices you send in QuickBooks become uncollectible, you can record them as a bad debt and write them off. This way, it ensures your accounts receivable and net income stay up-to-date. Here are the steps to write off invoice balances.

To start, create an expense account and create bad items as a placeholder for the unpaid invoices.

Next, make a credit memo and apply it to the invoice. Follow these steps:

Go to the + New button.
Click Credit memo.
Select the customer from the Customer ▼ dropdown.
In the Product/Service section, select Bad debts.
Under the Amount column, enter the amount you want to write off.
And in the Message displayed on the statement box, enter Bad Debt.
Select Save and Close.

These are the steps to apply the credit memo to the invoice:

Go to + New.
Under Customers, select Receive payment.
From the Customer ▼ dropdown, select the appropriate customer.
Under the Outstanding Transactions section, select the invoice.
From the Credits section, select the credit memo.
Select Save and Close.

You may visit this article as your reference when you reconcile an account to ensure your accounts in QBO are balanced: Reconcile an account in QuickBooks Online.

If you have any further concerns about your transactions, please don't hesitate to post them here. Have a great day!

Rainflurry

@kellyr2

The answer provided by @JamesAndrewM is incorrect. Cash basis taxpayers should not use bad debt expense because you would need to record income to offset the bad debt expense and cash basis taxpayers only record income when payment is received. If you create a credit memo and apply it, QB will book the income from the invoice and the expense from the credit memo, which you don't want since you never received payment. That procedure is for accrual basis taxpayers only.

The proper way for cash basis taxpayers to handle those invoices is to zero them out.

K

kellyr2Author

Thanks for your response. I knew, based on researching this topic here on this site, that bad debt expense would not work for my company. When you say to zero out the invoices, how is that done? Sorry if it's a stupid question but I want to make sure I do it correctly without affecting anything else.

RainflurryAnswer

@kellyr2

That's not a stupid question and I'm not sure my way is the best way. To zero out invoices, I change the amounts on all products/services to $0. If you delete the invoice, it would put any inventory items back in stock which you don't want. Then, I make a note (in the description field of each product/service or one of the message boxes) with the original invoice amounts. You can take a screenshot and save it as an attachment if you prefer. That way, if the customer ever comes back and can pay the invoice, you have a copy of the amounts.

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