If you are unable to collect payment for items purchased, we suggest using the direct write-off method.
The basic idea is that there needs to be a credit entry made to the accounts receivable (the customer) to remove the amount that will not be collected, and then a debit entry as an expense to report the amount of the loss to your business.
Handling the Account
- From the contact profile, click the.
- On the Payment form, clickto zero out the account.
- Under the Check Payment section, in the Number field, type **BAD DEBT**.
- Click to save and close the payment form.
Contact Log Entry
After posting a payment to clear the account balance, a contact log entry will automatically be added.
Create a Critical Reminder
- Click on the Notes tab of the profile.
- Under the Reminder section reference the bad debt with applicable information.
- Click the Critical, create pop-up checkbox, to ensure you are alerted of the bad debt if there is ever any contact made.
Set the Contact as Inactive
- Click on the Main tab of the profile.
- Under the Contact Information section, click the Inactive check box.
- Clickto save and close the profile.
Handling the Expense
Please Note: As with any business expense, we recommend consulting with your tax adviser to assist with tax-related decisions.
- From the sidebar navigation, click Business Tools, then Expenses.
- If you do not have a bad debt category created, from the Expense toolbar, click and select Expense Category from the drop-down menu.
- Clickto add a new category.
- Enter a Name, Description, and Type (Expense) to create the new Bad Debt category (or the category your tax adviser recommends).
Add an Expense Entry
- From the Expense toolbar, clickthen select New Expense to open the New Expense form.
- In the Pay To and Check # field, enter BAD DEBT.
- Enter the Date the account was written off.
- In the Memo field reference the contact's name and associated invoice number(s).
- Clickto add a row.
- From the Category drop-down menu, select the Bad Debt category.
- In the Amount field, enter the amount being written off
- When finished, clickto save and close the form.