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bob15
Dec 11, 2018 4:48 AM UTC
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How to handle accounts sent to a collection agency?

I followed the advice from QBES to use Bad Debt expense account, but it changes my sales tax and income balances. QBES vs 16

qbteachmt
qbteachmtAnswer
Dec 11, 2018 4:48 AM UTC

Don't use Bad Debt. That isn't the condition for you. This is not a Write off; it is awaiting collection.

Create an Other Charge Type item linked to an Other Asset account named for Collections. Use this on a Credit Memo and apply it to the open invoice(s).

Now AR is removed and this is held as a Different Asset, awaiting collection.

The collection is a Deposit entry, and if the customer balance is not fully collected, you would write off the Balance, at that time.

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24 replies

qbteachmt
qbteachmtAnswer
Dec 11, 2018 4:48 AM UTC

Don't use Bad Debt. That isn't the condition for you. This is not a Write off; it is awaiting collection.

Create an Other Charge Type item linked to an Other Asset account named for Collections. Use this on a Credit Memo and apply it to the open invoice(s).

Now AR is removed and this is held as a Different Asset, awaiting collection.

The collection is a Deposit entry, and if the customer balance is not fully collected, you would write off the Balance, at that time.

    heather6
    Dec 11, 2018 4:48 AM UTC
    I did this.  If they start paying, how do you apply payments?
      qbteachmt
      qbteachmt
      Dec 11, 2018 4:48 AM UTC

      "If they start paying, how do you apply payments?"

      When you get paid, you use Deposit against the Asset account for Awaiting Collection.


        Anonymous
        Dec 11, 2018 4:48 AM UTC
        Can you elaborate a bit more?  After setting up the Other Asset account for collections, when you are entering as Other Charge, do you link it in the Income Account and select " This item is used in assemblies or is a reimbursable charge?
        qbteachmt
        qbteachmt
        Dec 11, 2018 4:48 AM UTC

        "After setting up the Other Asset account for collections, when you are entering as Other Charge, do you link it in the Income Account"

        You already have income from the Invoice.

        This New Item is linked to the Other Asset account. That allows you to use it on the credit memo, to Close the AR balance (AR is a type of Revolving Asset by names) to a different Asset account (waiting for collection).

        "and select " This item is used in assemblies or is a reimbursable charge?"

        No; you don't need it to be Two Sided. It has One Account that it is linked to, and flows data to = Other Asset.


        nancyl
        May 28, 2020 3:08 PM UTC

        This is an old post but I'm hoping for clarification.  I followed the info above.  I was able to post off the invoice using the credit memo just fine.  When I go to Chart of Accounts, I go to Collections and see the invoice I posted off and when I run an A/R it is now gone.  My question is, shouldn't I see this Collections on the Profit and Loss? 

        MariaSoledadG
        MariaSoledadG
        May 28, 2020 4:59 PM UTC

        Hi, nancyl.

         

        You're unable to see this collection in your Profit and Loss report since this offsets the amount if both invoice and credit memo has the same items. Although, there are some options that you can choose on how to handle credit in QuickBooks Desktop.

         

        You'll want to retain it as available credit or give a refund. Here's an article that you can check out for more information and detailed steps: Give Your Customer A Credit Or Refund in QuickBooks.Desktop for Windows.

         

        In case you'll want to add and match bank transactions, please visit this link for your guide: Add And Match Bank Feed transactions in QuickBooks Desktop.

         

        If there's anything else that you want to help us with, let us know so we can get back.

        Joanne76
        Dec 27, 2018 1:38 AM UTC

        I still want track the individual customer account in accounts receivable-- just do not want it continue to charge a service charge or mail out a statement.  How do I stop those functions?

        VivienJ
        Dec 27, 2018 3:54 AM UTC

        Thanks for visiting the Community and joining this thread, Joanne76. 

         

        I'm here to lend a hand and stop the invoices to add service charges automatically. 

         

        To start off, which QuickBooks version (is it online or desktop) are you using? The program ensures you have complete control with the transactions you send to the customers. The details in the invoices depend on which information you've initially added. 

         

        It's possible the invoice was set as a recurring transaction, which is why the service charge is included. If you're using QuickBooks Online, you have the option to pause or delete the invoice. 

         

        Here's how:

        1. Go to the Gear icon, then select Recurring Transactions.
        2. Locate the invoice with the service charge.
        3. Click the Edit drop-down arrow at the far right side.
        4. Choose Pause, or Delete.
        5. Follow the prompt to successfully remove it (see screenshot below).

         

        Meanwhile, if you're using QuickBooks Desktop, you can delete it from the Memorized Transaction list section. Here are steps to guide you through:

        1. Go to Lists at the top menu bar, then select Memorized Transaction List. 
        2. Locate the invoice you're referring to. 
        3. Highlight and right-click on it.
        4. Select Delete Memorized Transactions. 

         

        For more details about recurring transactions in both versions, check out the articles below:

        Be sure to touch base with me here on the results of your testing or if you're referring to something different, I want to ensure this matter gets resolved. Have a great day! 

        Joanne76
        Dec 27, 2018 2:32 PM UTC

        Let me give you a few more details.  We use the desktop version of Enterprise Solutions 19 rev. R5.

         

        We have many customers who charge purchases on their customer account which they pay at a later date after we email or mail statements to them.  We charge a finance charge to these customers if they do not pay their bill within 30 days of their invoice date.  It is a percentage that is allowable by law.  We create an Invoice for all sales.  None of which are recurring.  Customer sales and invoices are tracked through their individual customer account.  All of these sales are kept under accounts receivable.  

         

        When a customer becomes delinquent beyond our ability to collect the balance due, we turn the account over to a collection agency to assist in collecting the account.  At the time this happens we can no longer assess finance charges or send out statements.  

         

        I have found that if I mark "none" in their customer account - payment options and when I print statements by "payment options" it will not generate a statement.  But I have yet to find any method to stop the system from assessing finance charges except by me manually telling it not to in the assess finance charges window.  This is very cumbersome and because we have hundreds of customers it is quite difficult and time consuming to review all our customers when applying finance charges.

         

        I am looking for another way to mark certain customers to stop applying finance charges.  

         

        Pretty simple request -- just not finding a method yet.  

         

        Can you help?

         

         

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