How to handle reduced balanced due for overdue invoices

Posted by gc on March 16, 2009, 11:18 pm

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I am considering offering a reduced payment (sign of times..sigh) for
several long overdue regular invoices & 2 FC (finance charge) invoices that
were not going to get paid otherwise (I collections would yield less). Now
I'm trying to figure out how to handle the transaction in Quick books Pro
2006.

Should I just give a one time discount? How do I waive the finance charges,
just delete them?

Lastly, any advice how I should treat this situation (balance due reduction)
to result in a tax deduction?

Thanks.
Gary

Posted by Laura on March 17, 2009, 7:14 am

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>I am considering offering a reduced payment (sign of times..sigh) for

>several long overdue regular invoices & 2 FC (finance charge) invoices that

>were not going to get paid otherwise (I collections would yield less). Now

>I'm trying to figure out how to handle the transaction in Quick books Pro

>2006.

Are you cash or accrual based company?

> Should I just give a one time discount?

I would do what ever you think will get some money out of the customer.
Maybe offer them a discount and a payment plan??

>How do I waive the finance charges, just delete them?

If you are a cash basis then just delete or void them. You have not
recognized the charges as income (you won't until paid) so deleting or
voiding them won't impact the financials.

If you are an accrual based company then you need to record the Bad Debt.
First create an expense account called Bad debt. There are several ways you
can do this but here is one easy way to do this (from the QB help file):

1. Go to the Customers menu and click Receive Payments.

2. Select the name of the customer from whom you incurred the bad debt.

3. Leave the amount field at 0.00.

4. Click on the line item that will not be paid to highlight it.

5. Click Discount & Credits. Your bad debt expense account should already
appear in the Discount Account field on the Discounts tab.

6. Enter the amount of the bad debt in the Amount of Discount field.

7. Click Done in the Discount and Credits window.

Note: The procedure described above does not affect your sales tax
liability.

8. In the Receive Payments window, save the bad debt transaction.

> Lastly, any advice how I should treat this situation (balance due

> reduction) to result in a tax deduction?

If you are a cash based company, then there is no tax deduction (you can't
write off what you did not write on). For accrual based companies, then you
record the amounts not received as Bad Debt.

Posted by gc on March 19, 2009, 1:53 am

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Laura, I'm using accrual method.
This is just the information I needed. I appreciate your help.

Gary