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Monday, April 26, 2010

I didn't get paid...Now what?

I have heard over the last few years people have had trouble collecting money (read with the requisite amount of sarcasm).

How do you write of bad debt in QuickBooks?

First make sure the Bad Debt account is set up. Many of my clients didn't know what a bad debt was until last year and therefore did not have an account for it. Next go to "Receive Payments" under the Customer Menu. Select the scofflaw's name in the "Received From" field, and the unpaid invoices will automatically populate.

Leave the payment amount $0.00, highlight one of the invoices then select "Discount & Credits" at the bottom. Enter the amount you are writing off, up to the total amount due on that invoice, and make sure the Bad Debt account is selected and click "Done". The amount written off will now show as a discount in the "Receive Payments" screen. You will notice the sentence fragment in bold above. For some reason QuickBooks requires that you highlight each invoice and go through the discount process with every invoice. It is not possible to post a discount larger than the amount due on the selected invoice. If you do you will get an error message that says "The discount amount cannot be more that the Amt. To Pay." (If I am wrong feel free to tell me, but several people have complained about this because usually if you are writing off one invoice to Bad Debt you will be wring off ALL that customers invoices). You may now choose "Save & Close" to complete.

Note: The process above will NOT change your sales tax liability. That has to be done separately depending on the state and local laws that apply.

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