Quickbooks instructions to write off bad debt in your company finacials
💡 Step 1: Make Sure It’s Really a Bad Debt
Before writing it off:
You’ve sent reminders or statements.
You’ve made reasonable collection attempts (calls, emails, maybe a friendly “Hey, buddy, you still owe me?”).
You’ve concluded that the customer won’t pay — maybe they went out of business or ghosted you completely.
Only accrual-basis businesses record bad debt. If you’re on a cash-basis setup, you haven’t recognized that income yet, so there’s nothing to “write off.”
🧾 Step 2: Create a “Bad Debt Expense” Account
This is where the uncollectible amount will land.
Go to Settings ⚙️ → Chart of Accounts → New
Choose:
Account Type: Expenses
Detail Type: Bad Debts (or “Other Miscellaneous Expense”)
Name:
Bad Debt Expense
💸 Step 3: Create a “Bad Debt” Product/Service Item
You’ll use this to zero out the invoice.
Go to Sales → Products and Services → New
Choose Non-inventory
Name it something like
Bad Debt Write-OffSet the Income Account to the Bad Debt Expense account you just created
Save it
🧮 Step 4: Create a Credit Memo for the Customer
Now, let’s make it official.
Go to + New → Credit Memo
Select the Customer
In the Product/Service field, choose your
Bad Debt Write-OffitemEnter the amount you’re writing off (the same as the unpaid invoice amount)
Save & Close
🔁 Step 5: Apply the Credit Memo to the Invoice
Go to + New → Receive Payment
Choose the Customer
Check both the Invoice and the Credit Memo
The total should now net to zero
Save & Close
📚 Step 6: Verify the Write-Off
Run this report to confirm:
Reports → Profit and Loss → Customize → Filter by Bad Debt Expense
You should now see the total amount written off under expenses.
This keeps your income accurate and your AR balance clean — no more zombie invoices haunting your books.
⚖️ Bonus Tip:
If you collect on that “bad debt” later (it happens!), record it as:
Income → Other Income → Bad Debt Recovery
