How to Handle Bad Debts

A "bad debt" situation occurs when money owed to you cannot be collected and has to be "written-off". When this happens, the customers account has to be reduced to zero, your accumulated Accounts Receivable has to be reduced by the write-off amount, and the Bad Debt expense account has to be increased by the same amount.


Here's how to do this:   

From the Lynx Main Menu . . .

1. Left-click on Bookkeeping and a drop down menu will appear.

2. Left-click on Accounts Receivable and then left-click on Invoicing.

3. Left-click on Add an Invoice Batch and then left-click on the tab.

4. Enter an Invoice # and then press the key. This will display the Find a Customer window. Select the customer account that you want to write-off and reduce to zero.

5. Key a MINUS 1 in the box and press the key.

6. Key any character in the box (like a "B") and a drop-down list will appear.

7. Left-click on the Bad Debt product from the drop-down list. 

If you don't have a "Bad Debt product", go to Edit the Chart of Accounts and add a Bad Debt expense account. Then Add a Service Product for bad debts.

8. Enter the amount you're going to write off in the box (as a positive number).

9. Press the key. The system will automatically insert the description and extend the total (which will be a minus amount since you put a minus 1 in the quantity field).

10. When you're done, post this batch to the General Ledger and then left-click the close button to return to the Lynx Main Menu.

If an account has been "written off" and the customer decides to pay, you need to reverse the procedure above. In other words:
1. Do the same thing as outlined in the procedure above EXCEPT enter a PLUS 1 in the Quantity box (instead of a MINUS 1).
2. Enter the payment received on the same invoice (use Enter a Payment from the Options button to do this).