How to Write off Bad Debt in ServiceTitan and QuickBooks (Desktop)

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1 How to Write off Bad Debt in ServiceTitan and QuickBooks (Desktop) Who should use this guide: Accountant Anyone in the office responsible for QuickBooks setup or exporting to QuickBooks. Overview During normal business operations, you may encounter customers that will be unable to pay the remaining balance they owe your company. If this occurs, you should write off the outstanding Accounts Receivable (A/R) as a bad debt expense. You will first need to ensure this customer s A/R is deemed bad debt. The criteria for bad debt is: The A/R balance has been outstanding for the past 90 days. The customer has gone into bankruptcy. If you need to write off bad debt, you will want to correctly record this in ServiceTitan and QuickBooks. Correctly recording bad debt will decrease your A/R and the income recorded for that transaction. Required QuickBooks setup Creating an expense account for bad debt You will need to create an expense account to map your QuickBooks bad debt item to. To begin: 1. Go to Lists > Chart of Accounts. 2. In the left corner of the Chart of Accounts window, open Account > New. You can also use the short-cut CRTL+N. ServiceTitan KnowledgeBase page 1 of 6

2 3. Select the account as Expense. 4. In the Add New Account window, fill in the required information. 5. Click OK. Your Bad Debt account should now show in the Chart of Accounts. Creating a QuickBooks item for bad debt You will need to create an item in QuickBooks to represent the bad debt. This item will be mapped to ServiceTitan, to ensure bad debt is mapped to the correct account when imported into QuickBooks. 1. Go to Lists > Item List. 2. In the left corner of the Item List window, open Item > New. 3. Enter the following information into the New Item window: Type: Other Charge Item Name: Bad Debt Account: Bad Debt 4. Click Ok. ServiceTitan KnowledgeBase page 2 of 6

3 Required ServiceTitan setup How to Write Off Bad Debt Setting up a bad debt service item You will need to set up a service item in your Pricebook to represent bad debt. To start: 1. Go to Settings > Pricebook > Service > Add New Service. 2. Set both the Name and Code. Note: You will also need to add a description for this service. You can simply put bad debt. 3. Ensure the checkbox beside Taxable is checked. Uncheck Allow Discounts. 4. In the General Ledger Account field, enter Bad Debt. This should match the name of the QuickBooks bad debt expense account you previously created. 5. Click Save. Recording bad debt in ServiceTitan and QuickBooks To record a bad debt in ServiceTitan, you will need to create an adjustment invoice. To do this: 1. Use the Search feature to find the invoice. 2. Click into the invoice. ServiceTitan KnowledgeBase page 3 of 6

4 3. On the left menu, click Add an adjustment invoice. If you can t see this option, make sure the invoice is posted and exported. 4. Click Ok on the pop-up message. 5. Click Add a task. 6. Search Bad Debt. 7. In the Unit Price field, enter in the amount you are writing off as a negative amount. This should be the amount before sales tax. Sales tax will be automatically calculated based on your ServiceTitan sales tax setup. 8. In Update invoice details enter an appropriate invoice date. The invoice date should be the date that you are making the adjustment invoice. 9. Click Save. 10.Batch and export the invoice to QuickBooks. ServiceTitan KnowledgeBase page 4 of 6

5 How adjustment invoices display in QuickBooks The adjustment invoice will show in QuickBooks as a Credit Memo. The adjustment invoice will show in your Transaction Journal as a debit to the bad debt item you created previously. It will also show as a debit to your sales tax item. ServiceTitan KnowledgeBase page 5 of 6

6 Your Profit & Loss Detail report will show the adjustment invoice as an expense (debit). The balance between the original invoice and the adjustment invoice should equal 0. Sales tax is not included in this report. FAQ Why can t I see the Add an adjustment invoice option on my invoice? The invoice must be posted and exported to be able to see this option. Why doesn t the sales tax on my adjustment invoice match the sales tax on the original invoice? This may occur if your sales tax rates have changed since you created the original invoice. You can manually create an invoice in QuickBooks if you need to make sales tax adjustments. ServiceTitan KnowledgeBase page 6 of 6