Receiving a payment for bad debt

After many weeks and months of waiting to be paid, you've decided to kiss that invoice goodbye and write it off as bad debt. But what happens if you do finally receive that payment?

Well, you'll need to make an adjustment to the debtors ledger.

Choose your situation below, and we'll show you how:

Scenario 1: The outstanding amount has been written off in the current period

If the outstanding amount has been written off as bad debt in the current accounting period, you'll need to unallocate and reverse the bad debt, then allocate the amount received to the unpaid bill amount.

From within the Debtors Ledger for your client, select the entry for the bad debt and click Unallocate.
With the entry selected, click Reverse, and enter the reverse date.
You'll then need to enter the amount received and allocate it against the unpaid bill amount.

Scenario 2: The outstanding amount has been written off in a prior (closed) period

If the outstanding amount has been written off as a bad debt in a prior period and the period is closed:

There are no entries to be processed as they have been cleared from the debtors ledger.

At the time of the write off, a bad debt journal was processed in the general ledger for the practice. Now that the cash has been received, simply bank it and process another journal in the general ledger to show that payment has been received and the bad debt has been recovered.