Updated: Jun 26
As a business owner, you might face with this unfortunate reality – uncollectible invoices. No matter how much effort you put on retrieve the money, but in vain, the customer cannot pay at all or even refuse to pay. When this happens, it is essential for you to write off the uncollectible invoices. There are a number of ways to remove the uncollectible invoices amounts from your accounting systems. In this blog, I will look at some reasons to write off invoices
Why do you write off Invoices in QuickBooks?
There are many reasons leading to this decision. Below are some common causes to write off an invoice:
Underpayment: This is the situation when the customer has made the payment on your invoice, but not in full. This happens due to a clerical error on the customer’s end. For example, the customer decided to pay $236 instead of $239. The balance due is just $3. In these cases, the balance often too small – even only pennies – to constantly reach out to the customer for the remaining payment
Bad Debts: The customer is unable to pay your invoice due to their financial circumstances beyond their control. Less common but still happen is that the customer decides not to pay. In either case, you might realize that it is time to write off their invoice in your accounting book.
Why do you might prefer writing off invoices to deleting them?
You might think of deleting the uncollectible invoices as the simplest way to write off an invoice. Doing so could result in several errors and can affect your accounting system:
You could lose important information. If you write off an invoice due to bad debt, you will retain this information. Therefore, you can decide to provide products/ services to this customer or not in the future. If you choose to delete the invoice, you will miss this information. moreover, the writing off method could show you the percentage of the invoice written off. As the result, you could manage your business more efficiently and profitably.
You might have unapplied payment. Deleting the invoice might be a good idea for a 100% open invoice, but a partially paid invoice. This could lead to a disorganized accounting book as well as make confusion and clutter in your book.
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