Unpaid invoices: Bad Bebt vs Credit Note vs Draft vs Delete

[adnw]

hi

i used to just delete invoices that hadn’t been paid, or adjust the outstanding balance to £0.

this time, i used the bad debt feature.

i also played around with issuing a credit not for the unpaid part.

what are the pros and cons of each method, and how does each effect any reports?

i noticed that if its done as a bad debt, it increases the turnover due to the unpaid invoice and also creates a bad debt expense.

thanks

[Michel]

Hi,

I am not an accountant, so take what I write with a grain of salt.

Tax-wise, they do not make any difference, but accounting-wise in terms of credit control and customer management, it makes a huge difference.

Generally I would advise against deleting invoices - they are never really deleted in the system for audit purposes, and if you ever get audited, deleted invoices will raise questions.

A “bad debt” has a different purpose than a credit note; bad debt insinuates that you were unable to collect the monies owed, pointing to a “bad customer”, e.g. unwilling to pay, so someone you probably want to avoid in the future.

A “credit note” on the other hand, indicates you are either refunding the client, or voluntarily relinquish the outstanding amount for some valid reasons (I’d give those in the comments on the credit note).

Hope it helps.

[adnw]

thanks for the response