Easy Tech TutsHow to Write Off Bad Debt in QuickBooks Online Easily 2026
By Impran M N
When a customer never pays an invoice, leaving it open on your books overstates your income and muddies your financial picture. This guide covers how to write off bad debt in QuickBooks Online correctly, so your records reflect what you actually collected. It's aimed at business owners and bookkeepers who want clean, reconciled accounts without guesswork.
01Confirm the debt is truly uncollectible
Before writing anything off, make sure you've exhausted reasonable collection efforts on the outstanding invoice.
02Create a bad debt expense account
Set up an expense account specifically for bad debt if you don't already have one, so these write-offs are tracked separately from normal costs.
03Apply a credit memo to the invoice
Use a credit memo tied to the bad debt account to zero out the unpaid invoice without deleting the original transaction history.
04Review the impact on your financials
Check your profit and loss statement afterward to confirm the write-off is reflected and your income figures are now accurate.
05Avoid common mistakes
Don't simply delete the invoice — writing it off properly preserves your audit trail and keeps sales tax records consistent.
Frequently asked questions
Will writing off bad debt affect my sales tax liability?
It can, depending on how the original invoice was taxed, so it's worth reviewing with your accountant before finalizing the write-off.
Can I undo a bad debt write-off if the customer eventually pays?
Yes, you can reverse the credit memo and record the payment normally if the customer later settles the balance.
How often should businesses review outstanding invoices for bad debt?
Reviewing aging reports monthly or quarterly helps catch overdue invoices before they become long-term collection problems.
Does this feature work the same for QuickBooks Online and Desktop?
The overall concept is similar, but the exact steps differ slightly between QuickBooks Online and Desktop versions.
Watch the full walkthrough
The same steps, demonstrated on screen from start to finish.
