Write off bad debt in QuickBooksLast updated on 08/31/2022
You may encounter customers that will be unable to pay the remaining balance they owe your company. If this occurs, you should write off the outstanding Accounts Receivable (A/R) as a bad debt expense. Correctly recording bad debt will decrease your A/R and the income recorded for that transaction.
Things to know
Follow criteria for bad debt
You will first need to ensure this customer’s A/R is deemed bad debt. The criteria for bad debt is:
The A/R balance has been outstanding for the past 90 days.
The customer has gone into bankruptcy.
Make sure to complete required setup in ServiceTitan and in QuickBooks
You will want to correctly record bad debt in ServiceTitan and in QuickBooks. Before you start recording bad debt, you will need to complete required setup both in QuickBooks and in ServiceTitan. Click the tab above for setup instructions.
You will need to create an adjustment invoice every time you record bad debt
You will use an adjustment invoice to record bad debt. Read below for instructions.
Record bad debt using an adjustment invoice
Use search to find the invoice.
Click into the invoice.
On the left menu, click Add an adjustment invoice. If you can’t see this option, make sure the invoice is exported.
Click Ok on the pop-up message.
Click Add a task.
Search "Bad Debt".
In the Unit Price field, enter in the amount you are writing off as a negative value. This should be the amount before sales tax. Sales tax will be automatically calculated (as a negative amount) based on your sales tax setup.
In Update invoice details enter an appropriate invoice date. The invoice date should be the date that you are making the adjustment invoice.
Batch and export the invoice to QuickBooks.
Set up QuickBooks to record bad debt
Create an expense account for bad debt
You will need to create an expense account to map your QuickBooks bad debt item to. To begin:
Go to Lists > Chart of Accounts.
In the left corner of the Chart of Accounts window, open Account > New. You can also use the short-cut CRTL+N.
Select the account type as Expense.
In the Add New Account window, fill in the required information.
Click OK. Your bad debt account should now show in your Chart of Accounts.
Create a QuickBooks item for bad debt
You will need to create an item in QuickBooks to represent the bad debt. This QuickBooks item will be mapped to your bad debt item. This ensures that bad debt will deposit in the correct account when exported to QuickBooks.
Go to Lists > Item List.
In the left corner of the Item List window, open Item > New.
Enter the following information into the New Item window:
Type: Other Charge
Item Name: Bad Debt
Account: Bad Debt
Set up ServiceTitan to record bad debt
Create a bad debt service item
You will need to set up a service item in your Pricebook to represent bad debt:
Go to Settings > Pricebook > Service > Add New Service.
Set both the name and code.
Ensure the checkbox beside Taxable is checked. Uncheck Allow Discounts.
In the General Ledger Account field, enter the name of the QuickBooks bad debt expense account (that you previously created). If you followed the previous instructions, the name of the account will be “Bad Debt.”
Bad debt - FAQ
For more about adjustment invoices, see QuickBooks Desktop users - FAQ.
Want to learn more?
Visit ServiceTitan Web Connector to QuickBooks Desktop for more on this topic
Important note: Some features may not be currently included in your account and additional configuration may be required. Please contact technical support for details.