Sometimes, customers may be unable to pay their invoices on time. In such cases, you may need to write off the invoice (or specific line items) as bad debt. In OfficeRnD Flex, you can record bad debt by issuing a credit note.
Note: We recommend consulting your accountant or bookkeeper to determine the best method for handling bad debt in your organization
Prerequisites for Recording a Bad Debt
Before recording bad debt, ensure you have completed the following steps:
Set up a Revenue Account:
Create a Revenue Account named Bad Debt. Follow the instructions in this article →
Set up a One-off Billing Plan:
Create a billing plan with a price of 0 and assign it to the Bad Debt Revenue Account. Learn how to set up Billing Plans →
How to record bad debt
To record bad debt, follow these steps:
Locate the overdue invoice:
Open the Company or Member profile associated with the overdue invoice.
Open the One-off Fees tab and click Add Fee.
Create a bad debt fee:
Select the Bad Debt plan from the Product drop-down menu.
Choose Paid from the Status drop-down menu.
Enter the bad debt amount in the Price field.
Click Add to save the fee.
Note: You can record partial bad debt by issuing a fee for only part of the invoice amount.
Apply the bad debt fee to the invoice:
Open the invoice you want to mark as bad debt.
Create a credit note with a placeholder line item.
Edit the credit note:
Remove the placeholder line item.
Add the bad debt fee you created earlier using the Add Existing Fee option.
Update the credit note.
Allocate the credit note:
Use the Allocate Credit button in the invoice view to apply the credit note to the invoice.
Once completed, the invoice and credit note will be reconciled, and no amounts will remain due.
Tracking bad debt
You can track bad debt using the Projected Revenue Report:
Open the report to view a separate line for the Bad Debt Revenue Account. This line shows the total bad debt for your organization.
The report also provides a breakdown of bad debt amounts by customer.
For more details, read the Projected Revenue Report article →