How to Fix Small Open Balances or Credits

How to Fix Small Open Balances or Credits

One of the common mistakes in QuickBooks® is within Accounts Receivable and small open balances or open credits.

Common Errors

  • Payment not applied to an invoice
  • Credit issued and not applied to an invoice
  • Small balances need to be written off


  • Accounts Receivable Aging Summary has a lot of aged balances and lines with zero or
  • small amounts in the total column
  • Open Invoices reports has many credits or small balances

Review the Accounts Receivable Aging Summary and the Open Invoices Reports to begin to clean up open payments or credits or write off small balances. From Reports > Customers & Receivables, both the Accounts Receivable Aging Summary and the Open Invoices reports can be run.

On the Open Invoices report, the date defaults to Today. Leave the date set to Today to avoid writing off an amount that was applied on a later date to another open customer invoice.

A review of this report will show payments or credits not applied to an invoice. The invoice and payment or credit is open although the customer balance may be zero resulting in a lengthy Open Invoices report.

Fix Unapplied Customer Payments and Credits With CDR 
Within the Client Data Review feature is the Fix Unapplied Customer Payments and Credits tool. On the first tab, the Open Invoices are matched with the Customer Payments that have been received, but not applied to an invoice. To apply these transactions, select a name from the Customers tab, then on the Invoices & Charges tab, select a payment to apply to an invoice by placing a check in the check box. You can choose Auto Apply All to apply all of the payments or each Payment and Invoice can be selected individually, then choose Apply.

Once applied, the transactions will be grayed on this window until Save is selected. The transactions will not appear again the next time the tool is opened.

Manually Cleaning Up Open Items Without CDR
Clean up of a data file is often needed without the assistance of the tools in CDR. Also, if a Journal Entry was entered to Accounts Receivable, the CDR tool will not be of assistance. If deposits were entered directly to Accounts Receivable on the deposits and not to an income account, the CDR tool will not resolve the issues. To manually apply open items to invoices, use
the following procedures.

1. Select Receive Payments and select the appropriate customer.
2. Leave the amount as zero and click on Discounts & Credits.

Within the Discounts and Credits window, select the Credit or Journal Entry to apply to an open invoice.

Write-Off Small Balances
One method to easily write-off small balances occurs when the payment is recorded in the Receive Payments window.
1. From the Open Invoices report, simply double click on the invoice with the open balance.
2. Click on the History link at the top of the invoice to open the Transaction History dialog box.
3. From the Transaction History dialog, click the Go To button to open the Customer Payment window.

4. Select the option for Write off the extra amount shown below.

5. Once Save & Close is selected, the Write Off Amount window is displayed and the general ledger account to which the write off is to be charged appears. The account to which the amount written off is then selected. This account is typically an expense account such as discounts, bad debts or some other expense account.

Write off Invoices Tool in Client Data Review

CDR also has a Write Off Invoices tool, to write off numerous invoices, statement charges, or financial charges at the same time from a single window. This tool saves time and allows a quick clean up of accounts receivable.

NOTE: The Fix Unapplied Customer Payments and Credits tool should be used prior to the Write Off Invoices option. If credits are available, this warning message will appear.

This tool allows a group of specified invoices to be written off all at once to a specified account. Using this tool, multiple invoices can be written off quickly. Several simple steps are needed to write off the invoice.

1. First, create a list of invoices to be written off by entering criteria and then clicking Find All.

2. Fill in any of the criteria on the screen to limit the list, and then click Find All. If no criteria are selected, all open invoices appear on the list. The criteria selected will vary based on the client’s industry, the size of the client and a number of factors. The client will determine which invoices should be written off.

The following criteria can be used:

  • Dates – There are four date options:
  • >120 days – invoice date is prior to today by 120 days or more
  • >180 days – invoice date is prior to today by 180 days or more
  • Review Period – invoice date is within the review period
  • Custom – invoice date is prior to the date you set in the Up to field

NOTE: The Up to field is set automatically to 120 days before today, 180 days before today, or to the last day of the review period, depending on the selection, unless Custom is chosen.

3. Enter the date in the Up to field.

  • Balance Due less than – The maximum invoice amount to display on the list
  • Transaction Type – The type of transaction that an invoice must contain to display on the list. Valid types are Invoices, Finance Charges, Statement Charges, and all three.

NOTE: Click on the column headings in the table of invoices to sort the list by that column. If criteria has been used to limit the list of invoices that displays, the limited list is sorted by clicking a column heading. For example, setting the criteria to display invoices more than 180 days old and then sorting by customer name.

NOTE: If a customer has credit, the credit should be applied before writing off invoices. As shown above, the column Avail Credit/Pmt will display a blue link CREDITS for those customers with available credits. Click the link and the Fix Unapplied Payments and Credits window opens to easily apply credits to the open invoices.

4. Next, select the invoices to write off.
5. Click a checkbox next to an invoice to select it.

  • Click Select All to select all the invoices in the list.
  • Click Deselect All to clear all the checkboxes. After deselecting all the invoices, the
  • selection process is restarted.

6. Specify the write-off terms.
7. Select the Write Off Account from the list. A write off account is required.
8. Change the write-off date, if necessary. A write-off date is required. By default, the writeoff date is the last day of the review period.
9. Enter a write off class if class tracking is used.

10. Click Preview and Write Off Selected Invoices. A confirmation of the write off appears which shows all the invoices to write off, the write-off account, and the total amount to write off. Click Write Off to complete the write off process, or click Cancel to return to the
main window.

NOTE: If the write off is canceled, the invoices are still selected. Click Deselect All to clear the selection, or continue working with the selected list.

Each invoice that is written off has a discount created and applied to it. A memo is added to the invoice and the discount transaction. All invoices written off through the CDR tool are tracked. To see the list of invoices changed, select Audit Trail of Review from the CDR center.

The transactions will be recorded as shown below.

Customers and Vendors are the Same
Clients often have customers and vendors that are the same entity. When sales to the Customer are generated, accounts receivable is increased and when items are purchased from the vendor, accounts payable is increased. While the two balances may offset each other, without action, they will remain on the books. Two remedies are available. The approach will depend on the volume of transactions that occur.

The first option is to create a bank account. It may be entitled something such as InterCompany. Determine which balance is lower, the amount in accounts payable or the amount in accounts receivable. Based on the lower amount, checks are written from the InterCompany account to pay the bills that are created and a corresponding deposit is made to the Accounts Receivable account for the same amount to offset the balance outstanding. The check and the deposit must always be for the exact same amount. Whatever balance remains either in A/R or A/P, is the amount either owed or due from the Vendor/Customer. The balance in the InterCompany account must always remain at $0.

The second option works the same as the option above, although a bank account is not created. A Credit Memo is issued for the amount of the Accounts Receivable that is being offset by the Accounts Payable and a Credit is issued against the bill for the same amount. Again, it is imperative that the Credit Memo and the Credit be for the same amount to facilitate an equal offset. An account must be charged on both the Credit Memo and the Credit. Using Other Income or Other Expenses is recommended. The transactions should net to $0 and not create a balance in either of these accounts.