Quickbooks is a quint-essential tool for small businesses and entrepreneurs. The diverse features and simple interface make Quickbooks a good choice, To record payments and cash flow. If you want to learn how to write off bad debt in Quickbooks. This article, Will help you a great deal.
Steps to Find How To Write Off Bad Debt In Quickbooks?
Not only I’ll teach you to write off bad debts from your books, But also let you know why it’s crucial to do so. Apart from that, I’ll also share with you some methods to recover your bad debts. Even if you have ruled out the possibility of receiving payments from the other end, You can still try the methods to increase your chance of decreasing your bad debts.
Create your Bad Debts as an Expense
- First of all, you can look for the List Menu, and choose Chart of Accounts.
- Then, visit the Account Menu, and choose New
- For the account type choose Expense; And then Continue.
- Enter the Account Name, For your Case, Enter ‘Bad Debts + Name’
- Choose Save and then Close.
Record your Bad Debts as an Unpaid Invoice
- Visit the Customers menu and choose Receive Payments.
- Now, Choose the Client from the Received from the field.
- For their payments, You have to enter $0.00.
- Choose Discounts and credits.
- Now, From the Amount of Discount option choose how much you want to write off.
- If you want to Discount an Account, Choose the account that you have added in the first step, And select done.
- Choose Save and then Close.
Why It’s Important to record bad debts
Bad debts are debts that are considered not receivable. It is different than doubtful debts; Because doubtful debts can still be allowed in books even if you did not receive payments. Most people put their long-term customer credits into doubtful debts as they have trust that those funds will be received in the future. But bad debts are plain losses, Either the customer doesn’t or is unable to pay up the debt. In such a case, It’s necessary to write off bad debts from QuickBooks. If you do not write off bad debts, Your tally will mismatch at the end of the statement. This can create a negative cash flow, Or your finances could be interrupted by wrong data. To keep your cash flow in real-time and with accuracy, It’s recommended for small businesses to write-off their debts that are older than 6-months.
Before you remove your bad debts, You can try different methods to recover them. I have shared with your few methods that are helpful in recovering debts.
1) Send a Reminder Invoice
If you had sent an invoice in past and did not receive payments. You can send a reminder for the same to the other person. Sometimes, people forget to keep up with their bills. And they might not intentionally avoid you paying. Sending a friendly reminder is all you need to recover your bad debts.
2) Settle for Less
Rather than closing the entire debts, Settle for less. Many of the time your client might not have the entire payment, Or the company might be going through a financial strain. You can offer them that they pay a certain proportion of the debt, And you will write off the other debt. People who might be hesitant to pay the entire amount; Might pay you a portion of it. This will significantly decrease your bad debts.
3) Outsource your debt recovery
If the debts are considerably large, You can resort to a debt recovery agency. They will with email reminders and phone calls try to recover your debts. And they will charge a fee for the service.