How Do I Clear Old Invoices That We Want To Write-off?

This article will help walk you through writing off older invoices or uncollectible client balances to clear them from Accounts Receivable.


If Sales Tax is reported on the invoice

NOTE: It is advised to follow these steps especially if the item or invoice has sales tax that needs to be credited for sales tax reporting. 

Step 1: 
Create Credit Item for Invoiced Item
    • Select Items
    • Select Edit to view the Item you want to create a credit for
    • Select the Create Credit Invoice link
    • “Credit” will automatically be added in the beginning of the description
    • This will cause Purchase and Selling Amounts to be a negative (credit)
    • Manually change any "Other Costs" to negative

  • Change the component number to the next item in the sequence. For example, if the Component of the original item was A, change the Component of the CREDIT item to B. 

  • Select Save and repeat this process for all unpaid items on the invoice.
  • Confirm that the amounts of the credit items = the unpaid balance on the invoice.
  • Add Invoice number of the original items to the CREDIT items. Save and close. This will clear the balance on the unpaid invoice.
Step 2: Reapply Credit to Balance Item to clear from AR
A. Put the credit from credit items back into Funds Available.
  • In the Money In screen, change the Payment Method to Apply Payment to Items from Funds Available, and set the Received From to the Client ID.
  • Scroll to the bottom half of the screen.  (Do not enter a dollar amount in the Amount field of the red #2 area, but you can adjust the date and description as you like.)
  • Filter for Invoice # and enter the total negative amount in the Amount to Apply  field on the credit items you created. 
  • If you do not see the item, change the "Filter" from Item Balance to All
  • Click Post Payment.  This will move the credit amount into Funds Available for this client.

B. Apply Payment to Items from Funds Available to the item with the balance
  • Make sure the Payment Method is still set to Apply Payment to Items from Funds Available.
  • Filter for Invoice # and enter a positive amount in the Amount to Apply field on the items with balance due. This amount should equal the total amount that was just moved to funds available.
  • Click Post Payment



If no sales tax is reported on the invoice

  • Post a receipt (use Receive & Apply method), just like you would if the client was actually paying you.
  • Change the Cash Account to something like “Bad Debt” and apply payment to all unpaid invoice items.
  • Click  Post Payment  and it will clear off the balance on that invoice.

The "Bad Debit" account does not exist in Studio Designer by default. You should consult with your bookkeeper about the best account to use for clearing these uncollectible payments.