How to Track Bad Debt Within QuickBooks

As a business owner, you need to be sure you collect payments from your clients and customers. However, there are sometimes situations where you can’t collect payment. It’s important to organize this bad debt within QuickBooks carefully. In today’s episode, Bernard Roesch will share how to track bad debt within QuickBooks.

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* Note that this blog post is derived from the transcript of the audio discussion. Please excuse any typos or odd wording.

What is bad debt?

Bad debt is simply the difference between what was invoiced to a client or customer and what was actually collected. Sometimes the entire invoice is not collectible, while other times, a portion of the invoice may not be collected. The portion that is not possible to collect is the bad debt. Bad debt is used in your accounting system to document the difference. It is not best practice to change the actual invoice amount because it’s important to track bad debt. As your company grows, it’s normal to have a certain amount of bad debt, but you need to be aware of it.

How to track bad debt in QuickBooks?

The first step to tracking bad debt in QuickBooks is to set guidelines for when to consider something as bad debt. Focus on what you would classify as exhausting practical ways of recovering the payment. Once you’ve exhausted those practical ways of recovering the payment, you should consider the amount of bad debt. To track bad debt in QuickBooks, create an expense account for bad debt. When something is considered bad debt, enter a bad debt credit on the client’s account to zero out the currently due payment.

Need help configuring bad debt tracking?

If you need help configuring a bad debt tracking process in QuickBooks, contact Bernard today. The process is fast to set up but can be a little confusing if you haven’t done it before. Bernard has helped many businesses get this level of tracking set up within QuickBooks, and much more.

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Bernard Roesch About Bernard Roesch

Bernard Roesch is co-founder and Managing Partner of Mission Consulting. Bernard’s background in the early years of his career was spent in the manufacturing sector, making his QuickBooks perspective a unique one – he understands the intricacies of a complex environment and then applies his strategic skills accordingly.