(A change in Bad Debt experience could tell you important things about the quality of clients you are serving, or how effective your collections are! ) If your former customer files for bankruptcy, you may have an opportunity to receive a share of the proceeds of the bankrupcy - even if it is only a small percentage of what you are owed. If there is this chance, you will need your invoice to support your claim. If the invoice was paid and refunded through Wave Payments, you can't delete the invoice. That's because you need records of actual funds moved by us, your payment processor. Accounting for bad debt with the Allowance Method The Allowance Method of accounting for bad debt is a more sophisticated approach, that does a better job of matching bad debt expense to the sales in each accounting period. Using the Allowance Method involves more accounting steps, and is more complicated both to understand and to operate. If you would like to learn more about this approach, you can read this article on the Accountancy Explained website.
(If the amount is large relative to your overall revenues, be sure to talk to your accountant who may, under some circumstances, recommend re-filing the prior year. ) Some Common Questions What about sales taxes? If you charge and recover sales taxes, writing off bad debt becomes a little more complex. Different jurisdictions have different rules about the conditions and timing under which you can deduct the sales tax element of your bad debts from your sales tax returns. Wave cannot advise on your local rules, and it is important you get advice from your accountant or tax authority directly. If you operate in a region where the sales tax element of bad debt can be deducted directly from your Sales Tax liability, however, then simply modify Step 2 above by applying Sales Tax to the Bad Debt Expense, just as you would when marking any expense to contain recoverable sales tax. This will offset the Sales Tax recognized on the 'paid' invoice. Alternatively, if you have added non-recoverable sales taxes to an invoice, you can remove the sales tax from the invoice before writing it off.
For example, they may not: falsely claim to be law enforcement officers claim that you'll be arrested if you don't pay your debt threaten to seize, garnish, attach, or sell your property or your wages — unless they are permitted by law to do it and intend to do so give false credit information about you to anyone, including a credit reporting company use a fake company name Learn more about your rights when it comes to debt collectors — and how you can regain control of your finances.
You are here Home › Blog › Facing Debt Collection? Know Your Rights August 6, 2013 Consumer Education Specialist, FTC Dealing with financial trouble is stressful enough. But when a debt collector is hounding you using unscrupulous methods, it can make matters even worse. The fact is, you have some rights when it comes to dealing with debt collection agencies. They're spelled out in the Fair Debt Collection Practices Act (FDCPA), which protects consumers from abusive, harassing or unfair debt collection practices, and is enforced by the FTC. Here's the abbreviated version of the key provisions: Under the FDCPA, debt collectors are not permitted to: call you before 8 a. m. or after 9 p. m. contact you at work if you've told them verbally or in writing that your employer doesn't allow you to get such calls in the workplace contact a third party about you for any reason other than getting your contact information; simply put, they may not tell anyone that you owe money harass or abuse you or anyone else they contact about you lie about the amount you owe use deceptive methods to collect a debt from you.
This would be the time to write off this invoice. (If you use Wave Payments and someone paid you, but then you refunded the invoice and want to delete it, writing it off as described below will be the way to go. This is because, since real funds were moved on your business, a) writing it off best reflects the actual loss you experienced, and b) as your payment processor, this is a record of the money movement for you on your books. This is explained in more detail below the directions. ) Write off invoice to Bad Debt Expense Right now, your bookkeeping includes $300 of income from Decorate Your Life. You have not actually been paid the money, so that is balanced by a $300 asset in Accounts Receivable - i. e. money you are owed. (This is because Wave invoicing is accrual-based. ) What we want to achieve is that the $300 Accounts Receivable asset 'disappears', and that we recognize the loss against your business income. Plus, you can stop seeing that overdue invoice every time you log in to Wave!