Managing bad debts in service receivables

Sometimes there are situations where you have billed for work, but might never receive full payment. You can post a credit invoice to the job, crediting the Bad Debt Expense account, for the uncollected amount. By not applying the credit to the open invoice, the credit invoice creates a $0 job balance but the invoice remains open. If you eventually collect the remaining contract balance, you can still post the payment to the invoice and void the credit.

For service receivables, create a service invoice type for posting bad debts. When setting up the type, enter the usual cash, discounts given, and cost of goods accounts. In place of the taxable and non-taxable income accounts, enter the account number for bad debt expense.

With a type for bad debt, you can generate reports detailing your bad debts for only the service work, and even create reports on a client by client basis.