An accurate accounts receivable list will help you avoid overstating income in your tax filings and enable you to be better prepared for future obligations. It is best to remove uncollectible invoices and/or record bad debt expense timely and accurately. It is best to reach out to customers who are late on payment and find payment solutions routinely. A significant amount of bad debt expense can influence how company executives and/or investors view the stability of your business. Nearly every business will have a customer who is unable to pay and will report bad debt expense. It is best to review what your customers owe you routinely You will need to record a Sales Receipt with the date you received payment and record the payment to an Other Income product/service item. If, in the future, a customer pays an older invoice that has been written off with a credit memo in a prior year, you will not be able to Receive Payment in your QuickBooks as usual with customer payments. Once you have the credit memo(s) needed you should Receive Payment and record a zero payment. Use care when creating the credit memo to include totals for nontaxable and taxable sales, making sure the amount in sales tax matches the invoice. You could attach your documentation on collection attempts and save that in the credit memo as well. You should list the information for the invoice being eliminated, since there is no number box currently in the QBO credit memo form. You don’t necessarily need to include descriptions on the credit memo, as those remain intact on the invoice. You want to record the identical product/service item(s) and identical amount(s) as shown on the invoice being eliminated. Complete the credit memo form with all the details from the invoice.Click on Credit Memo (in the Customers column).Use the date you determine the invoice to be uncollectible in the credit memo. Instead, leave the invoices in the accounts receivable register intact (and maintain a record of those customers to avoid in the future) and create and apply a Credit Memo to remove the invoice. Remove erroneous or older invoices you wish to “write off”ĭo not delete or void an older unpaid invoice to eliminate it. This article only discusses removing invoices for cash basis taxpayers. If you are a cash basis taxpayer, you haven’t ever recorded the income from unpaid invoices, so this isn’t an issue. that it is related to your small business andĪfter exhausting your options and documenting how your customer disagrees, went bankrupt or otherwise won’t pay, you proceed and remove that invoice.If you are an accrual basis taxpayer, the IRS is very strict about removing, or writing-off, unpaid invoices. Accrual basis taxpayers face strict rules relating to removing invoices Create a list of invoices that are either erroneous or need to be written off. Once you have a more accurate Open Invoices report, review the older, unpaid invoices and contact your customers who owe you. Finally, click Save and Close, so the payment is applied to the invoice and saved.Scroll to the Credits window, click on the payment.In the Invoices window, click on the invoice you need to apply the payment to.Use the date of the actual payment to keep the accounts receivable register intact.Record zero (0.00) as the payment amount. For the Date: use the date of the actual payment (to keep the accounts receivable register intact).Select the Customer name box (the customer with un-applied payments).Click on Receive Payment (in the Customers column).Apply un-applied payments and record a zero-payment. If you see invoices listed as well as payments in a customer register, you probably have unapplied payments. The Open Invoices report also displays un-applied payments. The Open Invoices report displays all unpaid customer invoices, for all years through Today. To access this report, click on the Reports tab: Periodically review the report called Open Invoices in QuickBooks Online (QBO) See my preceding blog post “ Accounts Receivable Review in QuickBooks Desktop” for specific step-by-step guidance. If you are using QuickBooks Desktop, the process is similar, but the “how to” steps are different. Overview: This article discusses the process of reviewing accounts receivable lists in QuickBooks Online. As always, it’s important to remember that keeping an accurate list of what customers owe you is a critical part of running your business. In Part 2 of our QuickBooks Training series, we’ll describe the Accounts Receivable process for QuickBooks Online.
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