How to Write Off Bad Debt in QuickBooks Desktop

Before you start

• Talk to your accountant before you write off a balance. Ask them which account to use and when.
• Intuit's own article on clearing small balances says to consult your accounting professional before you try it.
• Find the balances: go to Reports > Customers & Receivables > A/R Aging Detail to see what each customer still owes.
• Know the exact amount you're writing off: the whole invoice, or what's left after a partial payment.

Step 1: Add an expense account for bad debt

1. 1Go to Lists > Chart of Accounts.
2. 2Open the Account menu and select New.
3. 3Choose Expense, then select Continue.
4. 4Enter an Account Name, such as Bad Debt.
5. 5Select Save & Close.

You only do this once. If your chart of accounts already has a bad debt account your accountant set up, skip this step.

Step 2: Write off the invoice

1. 1Go to Customers > Receive Payments.
2. 2In Received From, choose the customer.
3. 3Enter 0.00 in the payment amount.
4. 4Select the invoice you're writing off.
5. 5Select Discounts and Credits, then open the Discount tab.
6. 6In Amount of Discount, enter the amount you're writing off.
7. 7In Discount Account, choose the bad debt account from Step 1, then select Done.
8. 8Select Save & Close.

No money changes hands. The discount clears the open balance on the invoice from Accounts Receivable and records the amount in your bad debt account.

Step 3: Write off what's left after a partial payment

1. 1Record the money the customer did pay in Receive Payments, and check the invoice.
2. 2When QuickBooks shows the underpayment, select Leave as Underpayment, then save.
3. 3Write off the remaining balance on that invoice with Step 2.

For more on recording partial payments, see how to receive payments and apply them to invoices.

Small leftover balances

Intuit has a separate article for small balances left by an error, an overpayment or an underpayment. It gives two ways to clear them and says to consult your accountant first.

• A journal entry: go to Company > Make General Journal Entries. For an underpayment, credit Accounts Receivable with the customer's name and debit the offset account. Then apply the credit in Receive Payments > Discounts and Credits > Credits.
• A discount to a charge-off account: Intuit's example uses an income account for minor charge-offs, applied as a discount in Receive Payments the same way as Step 2.

A small credit the customer will never use is the reverse case. It's covered in how to create and apply credit memos.

Where QuickBooks Desktop leaves the work to you

• Deciding that a balance won't be collected, and when, is a judgment QuickBooks doesn't make.
• The aging report shows what's overdue but not why. Someone has to chase the customer and find out.
• Intuit's steps write off one customer at a time in Receive Payments.
• Tax treatment and the right account are questions for your accountant, not the software.

To keep balances from getting this old, see how to set up payment terms and how to send customer statements.

How Logistify helps

Logistify doesn't write off invoices or chase overdue accounts. The Accounts Receivable Service matches customer payments in the bank file to the open invoices they pay and records them in QuickBooks Desktop as Receive Payments. Short payments wait for your team, so a person decides what happens to the balance.

If you're weighing a general chatbot for this work, read whether a general AI chatbot can do accounts receivable in QuickBooks Desktop Enterprise.