Write off (A/R), old unpaid invoices (2024)

‎December 04, 202310:16 PM

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.

• QuickBooks Accountant Online

Rainflurry

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 theAccounts Receivable Aging Detailreport. Doing so helps us review all your invoices that should be considered bad debt. I'll show you how:

1. Go toReports.
2. Find and open anAccounts Receivable Aging Detailreport.
3. Check which outstanding accounts receivable should be written off.
   
   

Then, create a Bad debts expense account:

1. Go to theGearicon and then selectChart of accounts.
   
   
2. At the upper right, clickNewto create a new account.
3. From theAccount Typedropdown, chooseExpenses.
4. From theDetail Type▼ dropdown, selectBad debts.
5. In theNamefield, enterBad debts.
6. HitSave 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 theGearicon, selectProducts & services.
   
   
2. At the upper right, clickNew, and thenNon-inventory.
3. In theNamefield, enter Bad debts.
4. From theIncome account ▼dropdown, chooseBad debts.
   
   
5. HitSave and Close.
   

After that, create a credit memo for the bad debt:

1. Go to+ Newand then selectCredit memo.
   
   
2. Choose the customer from theCustomer▼ drop-down.
3. From theProduct/Servicesection, clickBad debts.
4. On theAmountcolumn, enter the amount you want to write off.
5. In theMessage displayed on statementbox, enter Bad Debt.
   
   
6. HitSave and Close.

Once done, apply the credit memo to the invoice:

1. From the+ New, selectReceive payment.
   
   
2. Choose the appropriate customer.
3. From theOutstanding Transactionssection, add the invoices.
4. From theCreditssection, select the credit memo.
5. HitSave 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!

@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.

@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.

Hi.. Last question..

Write off feature in qbo is use for accrual basis only?

Then, for cash basis it is better to zero out invoices and if dont have access to change the invoice, better to use credit memo with income classification to zero out?

Hi.. Last question..

Write off feature in qbo is use for accrual basis only?

Then, for cash basis it is better to zero out invoices and if dont have access to change the invoice, better to use credit memo with income classification to zero out?

Hello Rainflurry,

Thank you for sharing your input to help address the issue. We love to see members supporting one another! Have a great day.

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

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 anAccounts Receivable Aging Detailreport to help you review all bills that are considered bad debts. To do this:

1. Go toReportsand enter theAccounts Receivable Aging Detailreport from the search section.
2. Check which outstanding accounts receivable should be written off.

Once reviewed, you may followSteps 2 & 3outlined 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+ Newicon and selectCredit memo.
2. Choose the customer from theCustomer▼ dropdown.
3. In theProduct/Servicesection, selectBad Debts.
4. Under theAmountcolumn, enter the remaining balance to write off.
5. In theMessage displayed on statementbox, enter “Bad Debt.”
6. Then, selectSave and Close.

Moreover, you canrun specific reportsto 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!

RE: Write off (A/R), old unpaid invoices

For the Cash Basis wouldn't you still complete most of the steps in @CharleneMaeF's response except for the last step to selectReceive payment?

If not could you please list the steps for the Cash Basis. Thank you.

Thanks for joining the thread, @angelacct.

Instead of receiving payments from your customers, you can issue a credit memo. By this, we can apply the credit amount to their invoice, which will show up as a return in their account. By doing this, you can clear the amount from your accounts receivable and reduce your net profit.

Here's how:

1. Select+ New.
2. SelectCredit memo.
3. From theCustomerdropdown, select the customer's name.
4. Enter the credit memo details, such as the date and the amount.
5. Once done, selectSave and close.

After creating the credit memo, it can be applied automatically to your invoices depending on if you've turned the settings on. Otherwise, here's how we can manually apply them to your invoice:

1. Go to+ Newicon, then selectReceive payment.
2. From theCustomerdropdown, select the customer.
3. In theOutstanding Transactionssection, select the open invoice you want to apply the credit memo.
4. In theCreditssection, select the credit memos you want to apply.
5. For the open invoice in thePaymentcolumn, enter how much of the credit you want to apply.
6. Leave thePayment method,Reference no,Deposit to, andAmount receivedfields blank.
7. Fill out the rest of the form and ensure the total is correct after applying the credit memo.
8. Once done, selectSave and close.

Furthermore, you'll want to check this article and learn how and when to give a credit memo or delayed credit to customers:Create and apply credit memos or delayed credits in QuickBooks Online.

Additionally, you can refer to this article for future reference if you want to learn how to personalize and add specific info to your sales forms:Customize invoices, estimates, and sales receipts in QuickBooks Online.

I'll leave this thread open for your comment if you need additional assistance managing your invoices in QuickBooks Online. Stay safe.

Hi there, @angelacct.

I'm glad to see that my colleague was able to help you resolve your issue. Rest assured, we'll continue to provide you with quality customer service.

If you have further QuickBooks concerns, feel free to come back here. I'll be willing to lend a hand. Keep safe and have a great day!

@angelacct

QB Employees don't understand proper accounting and it's clear by their responses that they really shouldn't be giving advice on how to handle this. On cash basis, you have two options for uncollectible invoices:

1) Zero out the invoice.

2) Create a Credit Memo with an item linked to an income account, not an expense account.

You don't want to use an expense account like Bad Debt Expense on cash basis because that will increase your revenue with an offsetting expense. Although the bottom line is the same, you don't want to show revenue from uncollectible invoices on cash basis.

I just realized that you had already answered that "zeroing out the invoice" is the best practice for cash basis.

Thanks so much for taking the time to answer the same question again. I really appreciate it.

Hello and good evening!

I have some invoices that are old with overdue balances. I want to write off the remaining balance so that it is off from the aging report. At the same time, I have some invoices that are partially paid. If I clear out the invoice to a zero, that is going to increase the revenue.

How do I clear the outstanding balance without increasing the revenue?

I want these off the books since they are really old.

Please help!

Thank you in advance,

Bless.

To zero out the open invoices, it'simportantto 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), @customer.

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

1. Navigate toSettingsand chooseChart of accounts.
2. In the top-right corner, clickNewto add a new account.
3. In theAccount Typedropdown, selectExpenses.
4. ChooseBaddebtsfrom theDetail Typedropdown.
5. Type “Bad debts” in theNamefield.
6. ClickSave and Close.

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

1. AccessSettingsand chooseProducts & services.
2. ClickNewat the top-right, then selectNon-inventory.
3. Enter “Bad debts” in theNamefield.
4. Select theBaddebtsoption from theIncome accountdropdown.
5. ClickSave and Close.

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

1. Click on+ New.
2. ChooseCreditmemo.
3. Use theCustomer ▼ dropdownto select the customer.
4. In theProduct/Serviceline, pickBad debts.
5. Enter the amount you wish to write off in theAmountcolumn.
6. In theMessage displayed onstatementfield, type in "Bad Debt."
7. ClickSave and Close.

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

1. Click on+ Newagain.
2. Under theCustomersoption, chooseReceive payment.
3. Use theCustomer ▼ dropdownto select the relevant customer.
4. In theOutstanding Transactionssection, locate and select the invoice.
5. In theCreditssection, choose the previously created credit memo.
6. ClickSave 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 oursystem,from these links:

• Run reports in QuickBooks Online
• Customize reports in QuickBooks Online

If you have further questions about clearing old invoices,you cancomment below, and we'll respondto youas soon as possible.

I appreciate you following this thread.

I'm here to share additional insights on writing off unpaid old accounts.

Ifyou'rereferring to the need to write off unpaid old invoices, you can record them as abad debt, allowing you to update your accounts receivable and net income.You can follow the steps outlined by my colleaguein the previous reply.

If you're referring to clear unpaid bills from your Accounts Payable account, you can delete them if you operate on a cash basis. However, if you have unpaid bills and use accrual accounting,you'll need tocreate acredit memoto clear those bills.

When making the credit memo, use the same expense accountthatwasusedfor the original bills. Then, you can apply the credit memo to the unpaid bills to remove them from yourAccounts Payableaccount. This approach allows youto properly account for the transactions on an accrual basis.

Additionally, you can generate reports togain a deeper understanding ofyourbusiness'sfinancial health, improve financial management, better planning, andultimately, more sustainable growth for your company.

Should you have any other questions regarding the write-off of unpaid old accounts or any other concerns, visit the Community. We are always here to help. Stay safe.