When you are dealing with business, it is quite natural for you to write some debts every now and then, in your QuickBooks account. If you are unaware of what exactly Bad Debts are, then it is the money that is not yet paid to you. When it comes to getting your old dues, there are two options for you; one is to go for a collection agency and the other is to chase those clients until they pay you. However, it is recommended that you get rid of the bad customers and get on with your process.
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Significance Of Account Creation
The first step for getting rid of your debts is by creating new accounts that will add to the charts of accounts in your QuickBooks. You have to create a new account by navigating in the menu bar and click on the tab of options. There you will get a chart of accounts and by selecting a new file from there, you can name it as bad debt.
Adding The Item
You will also have to add an item in QuickBooks that you will need for invoicing. On selecting the item list, you will get a drop down option from where you have to choose a new item. For further categorizing it under the segment of bad debt, you will have to click on Other Charge and name it under the file name of Bad Debt. Here the description that you give will also be used in writing the invoice.
Credit Memo Set Up
You can create a credit memo, which is one of the most preferred ways to write off the bad debts. As it is a simple process, it will allow you to keep your books straight by adjusting the sales tax liability. For creating a credit memo, you will just have to follow the procedure.
After you are done with the credit memo, you can now write off the bad debts quickly and create an invoice as per that.
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