How do I deal with customer non-payment?

[Colin Law]

2009/12/3 Heather J. Daley <gnucash at joyful.limedaley.com>:
> On Thu, 3 Dec 2009, Maf. King wrote:
>
>> On Thursday 03 December 2009 00:40:24 Heather Daley wrote:
>>>
>>> I have a customer who has paid part of an invoice but is not going to pay
>>> the rest.  How do I account for that "lost" income?
>>
>> Hi Heather,
>>
>> 2 ways - you could issue a credit note to the customer and reduce Income
>> (probably the best way, since you are getting part-payment),
>
> How do I do that in gnucash?  What is the other side of the double entry
> when I reduce the income?
>
>> or
>> you could allocate the "lost" bit to Expenses:Bad Debt (although that is
>> more
>> for when customers go bankrupt and don't pay any of the invoice)
>
> This brings up a related issue.  This customer also has another unpaid
> invoice, which I simply unposted and rendered inactive because the whole
> thing was going to be ignored.  Is it better to keep it posted and offset
> the entry with Ex:Bad Debt?  What do I then do at tax time?  The invoice was
> for services only, if that makes a difference.
>
> Or is this the kind of question to ask an accountant?  At first I was just
> asking how to do it in gnucash, but it now seems like it's more complicated
> than that.

If you have done work and not got paid for it then you need to have it
in the accounts so that you can count it as a loss that will come off
your gross profit and hence reduce your tax.  Even if it was only a
service and so did not actually cost you any money, only time, it
still counts as a loss.  Time is money.

Colin

Colin