Need To Write Off An Uncollectible Invoice?

By: Rachel Raupp

Need to write off an uncollectible invoice but don’t know how? It’s sad but sometimes people don’t pay you what is owed.  You need to get these numbers out of your books, but you also want to track this correctly, so what do you do? Here are step-by-step directions to do this in QuickBooks:  

Step 1.  In your Chart of Accounts create an Income Account called “Bad Debt.”

Step 2.  In your Items create an item called “Bad Debt-Uncollectible” and link it to “Bad Debt” (the account you created in Step 1).

Step 3.  Create a Credit Memo in your QuickBooks and use the Item “Bad Debt-Uncollectible” (that you created in Step 2) with the amount that you need to write off.

Step 4.  Apply this Credit Memo to the invoice(s) that are uncollectible.

Now when you look at your P & L report, you’ll see a negative number in the Income Area, labeled as “Bad Debt.” Although it seems unusual to have a negative number for Income, this is correct.

Here is an example of what is happening in the background:

Consulting Services Income            $500.00

Bad Debt                                              -$500.00

                    Total:                                      $0.00

Step 5.  Make a note to never do business with this individual/company ever again!