How to Write-Off Bad Debts in QuickBooks Online

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Bad Debts in QuickBooks Online

You made a sale, but the customer has not paid the debt owed to your company. This will make the original invoice to go unpaid and will create a “bad debt.” Before you decide to record a bad debt, you should create a “bad debt account” to keep track of any such transactions. This action will help you to use the Discounts and Credits option within QuickBooks. The debt will be recorded in this separate account, and this info will help you while doing taxes.

In QuickBooks Online, there are various ways to handle the “Bad debts.” You need to keep consulting the accountant if you use the “Accrual Basis” accounting method with the following conditions:

  • Not using the allowance method
  • The amount of this should have been a high percentage of the gross sales recorded for the year the write-off is filled in.

Cash Basis Method

If you submit the taxes on a cash basis, then ideally you should “void” the open invoices as they are not entered reported as income. To delete the invoices, follow the below steps:

  1. select Sales or Invoicing
  2. choose Customers.
  3. Select the Customer’s Name.
  4. Click for Open Invoices
  5. Select a Date Range
  6. Choose each invoice for which payment is not received.
  7. Navigate to the bottom left & choose the option (More >> Void)
  8.  Select “Yes” to Void

When the invoice is voided, then reopen it and enter “bad debt” in the memo and select “Save.” 

Direct Method

If the amount that is to be “written-off” affects the gross sales, in such a case, you should consult your accountant before doing any further entries. Ensure to have a “bad debt expense” account created.

You May Also Read: What to keep in mind while starting up with QuickBooks Online?

Create a Bad Debt Expense Account:

  1. Choose the Gear icon at the top
  2.  Select Chart of Accounts.
  3. Choose New
  4. Select Expenses in the Category Type
  5. In the Detail Type- choose Bad Debts
  6. Enter Bad Debt in the name type
  7. Select Finish


 Create a “Product Item” for Bad Debts:

  1. Select the Gear icon
  2. Click for Products and Services
  3. Choose New
  4. Select from Non-Inventory item or Service & enter the Name
  5. In the Income Account field select Bad Debt
  6. Select Save


Now issue a “Credit Memo” to the client:

  1. Choose Plus icon at the top of the window
  2. Choose Credit Memo
  3. Enter the Amount that is to be written off
  4. In the “Memo” field- fill in Bad Debt
  5. Select save


Bad debts can create unnecessary and unexpected trouble for your business. Hopefully, the article was comprehensive in providing a solution and solving the issue. However, in case the problem persists, and you feel the need to speak to a technical expert, call QuickBooks Error Support Number  1-877-263-2742  and get your issue solved.

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