Write off bad debt in QuickBooks

Overview

You may encounter customers that are 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.

Note: In ServiceTitan, Non-Sufficient Funds (NSF) follows the same solution as bad debt.

Things to know

Follow the criteria for bad debt      

You will first need to ensure this customer’s A/R is deemed bad debt. The criteria for bad debt are the following:

• The A/R balance has been outstanding for the past 90 days.

• The customer has gone into bankruptcy.

Set up ServiceTitan to record bad debt

Before you start recording bad debt, you will need to complete required setup both in QuickBooks and in ServiceTitan.

Create a bad debt General Ledger Account

To set up a General Ledger Account to expense bad debt:

1. Go to Settings .

2. In the side menu, go to Accounting > General Ledger Accounts > Add GL Account.

3. Create an Expense account that matches your QuickBooks account.

   Note: We recommend naming this GL account Write Off - Bad Debt.

4. Click Save.

   
   

Create a bad debt Payment Type

To set up a Payment Type to use for recording bad debt:

1. Go to Settings .

2. In the side menu, go to Invoicing > Payment and Invoice Types > Add.

3. Create a Payment Type and select the above General Ledger Account from the Account dropdown.
   Note: We recommend naming this payment type “Write Off”.

4. Click Save.

   
   

Set up QuickBooks to record bad debt

Create an expense account for bad debt

To create an expense account to map your QuickBooks bad debt item to:

1. In QuickBooks, go to Lists > Chart of Accounts.

2. In the Chart of Accounts window, open Account > New.

   Tip: You can also use the short-cut CRTL+N.

3. From the Account Type dropdown, select Expense.

4. In the Add New Account window, fill in the required information.

   Note: We recommend naming this account Write Off - Bad Debt.

5. Click Save & Close. Your bad debt account should now show in your Chart of Accounts.
    

6. In ServiceTitan, go to Settings .

7. In the side menu, go to Integrations > Quickbooks Desktop > Company File.

8. Click Edit next to Chart of Accounts Mapped and make sure the bad debt GL account in ServiceTitan is mapped to the one in QuickBooks.
    

Record bad debt using an expense payment type

1. Use search to find the invoice.

2. Click into the invoice.

3. On the left menu, click Collect and Apply Payment.
    

4. Select Writeoff from the Payment type dropdown and enter the remaining balance into the Amount Applied column.
    

5. Confirm the payment is applied to the correct invoice.

6. Click Save.

   
   

7. Batch and export the payment to QuickBooks.
   

Want to learn more?

• See AR Transactions report