Did your customer refuse to pay the money they owe to you? If so, you should write off the invoice and prevent yourself from sales tax. This will ensure that your account’s net income stays updated. If you have no clue how to write off an invoice in QuickBooks Online or QuickBooks Desktop, we are here to enlighten you.
- Why Do You Need to Write Off an Invoice in QuickBooks Online?
- Write Off Invoices Rather Than Deleting It
- What Are the Ways to Write Off Invoices?
Why Do You Need to Write Off an Invoice in QuickBooks Online?
As a business owner, you must have fallen into a scenario where customers refuse to pay the debt. There can be any reason behind it. For instance, your customers are unable to pay the money due to technical errors or the customer changes his mind and is not willing to pay the debt due to certain reasons.
As a result, these invoices go in vain. At the same time, you cannot keep these unpaid invoices in QuickBooks as you may need to pay sales tax (that you didn’t even collect). Hence, writing off the invoice is the only option left for you.
Write Off Invoices Rather Than Deleting It
As stated earlier, writing off the invoices becomes a necessary task if the customer does not pay the debt. However, some users might think of deleting the invoice entirely from their QuickBooks account.
Doing so can result in unexpected problems. Here are the following things one should consider while deleting or writing off the invoices in QuickBooks.
- By deleting the invoice, you will lose valuable information such as customer and product details. On the other hand, when you write off the invoices, you can keep the important details safe for the future. Also, it will help you to track the percentage of the invoices you write off in QuickBooks.
- When you delete the invoice, it will be considered unbilled. In addition, these items will appear every time you engage with your customer. Your bookkeeping record can become unorganized.
Consequently, deleting the invoice can create conflicts in your business. Hence, it is better to write off the invoices as bad debt and prevent yourself from messing up with the sales tax payable liability account.
What Are the Ways to Write Off Invoices?
Users can write off the invoices in different ways. For instance, you can manually use the write off invoices feature of QuickBooks Online or use the write off invoices tool in QuickBooks Online accountant. QuickBooks Desktop users can also write off the bad debt easily. Let’s understand the whole procedure in detail.
How to Write Off Invoices in QuickBooks Desktop?
In QuickBooks Desktop, one can easily write off invoices. All you have to do is create a customer, bad debt field, add the item as bad debt, and write off the invoice. Let’s know how to write off invoices in QuickBooks Desktop.
- Launch “QuickBooks Desktop” on your computer.
- Go to the “Customers” tab located on the top menu bar.
- Click on the “Customer Centre” option.
- When the new window opens, add the name of the customer on the left.
- Choose the invoice from the available list.
- Now, click on the “Customers” tab again from the top.
- Select the “Create Credit Memo/Refunds” option.
- When the “Credit Memo” window opens, enter the name of the customer. Also, mention the date for writing off the invoice. This will automatically fill in the credit memo number.
- Now, create a “Bad Debt” by clicking on the “Item” option.
- Then, click the “Add New” button.
- Select the “Other charges” as the type.
- Then, click on the “Item” and choose “Bad debt”.
- Add a product by using the “Bad debt” you created as an item.
- Now, remove the check for the “Is Taxable” option.
- Hit the “Save and Close” button.
- Here, mention the pretext amount of the unpaid or bad debt.
- Choose the invoice you wish to write off.
- Then, select the “Use credit to apply to invoice” located on the top.
- Click the “Save and Close” button.
How to Write Off An Invoice in QuickBooks Online?
If you prefer to write off an invoice in QuickBooks Online then you can use the Credit Memo feature. This will restore the sales tax liability account to the original state as it was before the bad debt problem. Here is how to write off unpaid invoices in QuickBooks Online.
- Login to your “QuickBooks Online”.
- Open the invoice that you want to write off.
- Select the “+New” icon located on the left.
- Click on the “Sales” option.
- Select the “Customers” option.
- Add the name of the customer and select the invoice from the list.
- Now, create a new credit memo. For this, open a new tab in your web browser.
- Then, go to the “+New” icon on the left.
- From the “Customers” tab, click on the “Credit Memo” option.
- When a “Credit Memo” window appears, add the required information such as customer name, date, billing address for the invoice you are writing off.
- Then, create a bad debt item by going to the “Products and Services”.
- Click on the “Add new” button.
- When a new window shows up, add the “Bad Debt” in the name field.
- Also, select the “Bad Debt” for both “Account type” and “Category”.
- Go to the “Gear” icon.
- Click on the “Product and Services”.
- Add a new product and enter “Bad debt” as the name. Also, choose the “Bad Debt” account that you just created.
- Mention the amount for the invoice you are writing off.
- You can also enable the “Sales Tax” option.
- Then, hit the “Save and Close” button.
- To implement this “Credit Memo”, click on the “+New” icon.
- Then, click the “Receive Payment” button.
- In the “Outstanding Transaction”, choose the invoice and customer you wish to write off.
- Now, go to the “Credit” section, select the credit memo you created earlier.
- After applying the credit memo, the amount should be Zero.
- Click the “Save and Close” button.
We have discussed how to write off an invoice in QuickBooks Online. All you have to do is create a bad debt expense account, create a bad debt item, create a memo, and apply this credit memo to the invoice.
How to Use Write Off Invoices Tool in QuickBooks Online Accountant?
To use the write off invoices feature of QuickBooks Online one has to use the Write Off Invoices tool. The tool is available for Accountant users. Here is the step by step guide that you can follow:
- Click on the “Accountant Tools”.
- Choose the “Write off invoices” option.
- Now, adjust the “To Date, “Balance less than”, and “Invoice Age” to search your invoice.
- Click on the “Find invoices”.
- Inside the “Customer” column, review the name.
- Click on the checkboxes with the invoice that you wish to write off.
- Then, click on the “Write off” option.
- Now, use the “Account” dropdown to pick the account that you wish to use for the bad debts.
- Hit the “Apply” button.
These are the steps for how to write off an unpaid invoice in QuickBooks Desktop. In case you write off the invoice that is dated before the closing date then you don’t have to add the closing date password.
To Sum Up
It is common to fall into a situation where a customer does not pay the debt. Although you probably don’t get the money from the customer, writing off the invoice can prevent you from paying the sales tax for the product you didn’t even get paid for.
This is why it is important that you mark such invoices as bad debt and write them off. This will store the product or customer details (if needed in the future). Moreover, you can keep the bookkeeping organized.
Do you want to know more about creating invoices and credit memos in QuickBooks? Go through the following guides:
Frequently Asked Questions
Yes, you can definitely write off the invoice in both QuickBooks Online and QuickBooks Desktop. For the online version, all you have to do is create a customer, bad debt field, add the item as bad debt, and write off the invoice.
Customers often don’t pay the money they owe to you. If that is the case, you should write off the invoice you created for the customer. This will save you from the sales tax liability and keep the customer/product information saved simultaneously.
Yes, one should remember this thing that deleting the invoice can remove the product and customer detail. So, it is better to write off the invoice instead of deleting it permanently.
Although you can write off the invoices manually, using the Write Off Invoices Tool makes it easier to get the job done. Remember this tool is only available for QBO Accountant users. To use this tool, you will have to open the Accountant Tools and click Write Off Invoices. Thereafter, apply the filters for date, invoice age, balance, and then click Find Invoices. After reviewing the customer name, pick the invoices you want to write off. Don’t forget to choose the account that you use for bad debts.
Unpaid Invoices can be set as write-offs under two conditions; underpayment and bad debt. To write off the invoices that are unpaid, you can open the Reports menu and choose the Open Invoices report from the Customers & Receivables drop-down. After this, you can find the customer and enter required details such as the amount owed, invoice number, and customer’s name. Then, select the Customer Center menu and start creating the credit memos & refunds. Once you provide the necessary information in dedicated fields, click the Save button.