Marking a sales invoice as bad debt is done when there is a certainty it is not going to be paid. Beforehand, you have probably marked it as doubtful, but that is not always necessary. You can also proceed directly to mark it as bad debt, but must have a good reason for doing so. To mark an invoice as bad debt, at least one of these two conditions must be met by law:
- It is certain that the invoice will never be paid, for example, due to death or bankruptcy.
- The invoice should have been paid a year ago by now and still hasn't been paid.
Why mark it as bad debt?
As long as an invoice is outstanding, it is included in your accounting records. After all, the customer has a payment obligation and so all the numbers assume that the money is going to come. However, sometimes that is not the case. It is then time to properly remove this invoice from the bookkeeping. This way you will reduce your profit as well as settle the sales tax you have already paid.
How do you mark the invoice as bad debt?
Marking an invoice as bad debt is very easy in Daxto. From any invoice that is outstanding, you can go to Actions → Mark as bad debt. Your personal Daxto assistant takes care of all the paperwork in the background, and you can get right back to your own work.