Knowledgebase

How do I write off a bad debt on an old invoice?

When you have an outstanding invoice from last year, which you know will never be paid, you may perform the following steps to zero out the invoice so that it will no longer appear on your accounts receivable, and reclaim any taxes you have paid on this invoice.

1. In the Invoice file, perform a Find for the invoice with the outstanding balance.

2. Click purple Data Entry button if you have selected the invoice from a list view, otherwise, go to step 3 as you are already on the Data Entry screen.

3. Click the grey Allow this Invoice to be Modified button.
This button will only appear in the top left corner if the invoice is older than one month.

4. Click on the Enter A Payment button (lower left corner).
The amount owed will automatically be entered on the receipts screen.

5. Select “Bad Debt” from Tender pop up list.


If 'Bad Debt' does not appear in your pop up list, click on Edit at the bottom of the list and add it to your list, on it’s own line, above the hyphen.

6. Click Done Go to Form View button.
Your invoice should be similar to this.



7. Take note of the Items which are listed on this invoice. Write them down or print out the invoice as we will be entering them onto the invoice to reclaim the taxes and zero out the ‘bad debt’.

8. Create a new invoice by clicking on the New Invoice button.

9. Use the purple Search Item button to enter all the items from the previous invoice. Enter the Qty as a minus number. E.g. -1 or -4, etc. (If the retail product number is still located in the Products file, the inventory for the item will be increased to show the return of the item which was removed on the previous invoice. If it is a work order, inventory will not be affected.)

10. Click Enter a Payment button. The amount should appear as a negative number.
 
11. Select “Bad Debt” from Tender pop up list.
 
12. Click Done Go to Form View button.
You may need to enter the name of the sales rep if your program is not set up to automatically enter a name.



13. In the Inv Note field in the bottom left corner, enter a brief explanation of the bad debt and identify the original invoice number. This will save you time at year end explaining this to your accountant or an auditor.

14. Go back to the original invoice and enter a similar note identifying the new invoice created to remove the debt.



On your Sales Report you will notice the taxes for the invoice as a negative which reclaims the amount of taxes paid. Both the monthly Sales Report and End of Day Sales Report will look the same.




On your report showing your Receipts, the positive and negative tender of “Bad Debt” for the same amount will balance to zero.

Related Articles

• How do I fix the mistake of not giving a discount on a work order and I have already posted the invoice and paid my vendor taxes?
• Tender field terms
• Daily Summary Report
• Monthly or Weekly Sales Report
• Issuing and redeeming a refund for returned goods video

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