Bad credit is money that a business or company can repay to a debtor if a borrower falls into debt or is unable to repay the loan for other reasons. Bad credit is often associated with the receipt of an account and is also called an uncollectible account. Having a bad credit account and clearing illegal debts is important to avoid inconsistencies in income statements and profit and loss reports.
Now you may be wondering how to get rid of bad credit in QuickBooks? Debt problems can adversely affect profit and loss reports while syncing accounts in QuickBooks. This is why businesses need to write down bad debt on QuickBooks Online, which often makes sales on credit, as financial companies need to manage a separate bad credit account to erase bad debts that cannot be collected. By clearing bad debts in QuickBooks, you can delete invoices for account receivables that help you get the right amount of interest in QuickBooks.
This blog will give you the necessary information and steps to help you get rid of bad debt in QuickBooks Online. However, before we write down bad debt, we must first learn how to write it down and record it.
Steps to Write Off Bad Debt in QuickBooks
The following are steps that will erase “how to clear bad credit in QuickBooks Online queries“:
Check the A / R Aging Report
First, you’ll need to click on the ‘Reports’ section from the left-hand panel in QuickBooks.
After that, you will need to search for the Receive Aging Account report from the search bar at the top.
Now to view your unpaid account, you must click on the Accurate Aging Account Report.
Create a Bad Credit Account in QuickBooks
- First, click the Gear icon in the Company section and select the Accounts Chart option.
- Select the option to create a new account.
- Next, you must click on the expense option from the account type drop-down list.
- After that, select all your bad debts from the drop-down list and type Bad Debt in the name field.
- Finally, click Save and close to close this process.
- Set Credit / Bad Product Item
- First, click the Gear icon and select Products and Services from the list below.
- Second, you must select the Product and Services option under the list section.
- After that, click on the new product, and from the Product / Information section, click the non-inventory option.
- Next, you will have to type the bad credit inside the word box.
- Now, select the Bad Debt Expenditure you created in the Income Account section.
- Next, tick the “Taxable” checkbox.
- Finally, you will need to click the Save and Close option.
- Set up a Bad Credit Memo
- For the first step, click the merge icon at the top of your QuickBooks dashboard.
- After that, you will need to select a Credit Memo under the Customer category.
- Next, you must select a customer from the Customer drop-down list.
- Next, select the item that you have incurred in the Product / Service category.
- Now, type the amount of bad credit / unpaid invoices with good prices.
- Navigate to the text box of the memo and type the amount of bad credit there.
- Finally, click Save and close the option to complete this step.
- Use the Credit Memo to apply for credit.
- Start this process by clicking on the integration icon located at the top of the screen and navigating to the “Get Payment from Customers” section.
- Next, you will need to select a customer from the Customer drop-down list.
- After that, select the invoice you want to write in the prominent transaction menu.
- After that, you will have to select the credit memo you created under the Credits section.
- Start a check and confirm that the price shown in that category is $ 0.00.
- Finally, you should click on the Save option and close to close this process.
- Once you’re done setting up a bad credit account in QuickBooks, you can fine-track reports and view all bad debts and unpaid invoices. Use a bad credit report, click the Gear icon and under your Company section, select Accounts Chart, search Bad Debt and click action drop-down in Run Report.
It is so important to get rid of bad debts to avoid any money laundering. Following the steps above will help you to write down bad debts on your QuickBooks software. These steps will show you how to view, create, set up and use your credit-related information.