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The allowance for bad debts is the amount expected to be uncollectible, but that still has the possibility of being collected. This means these amounts must be recorded for accounting purposes, but they should not affect customer balances because we still want to collect them. These amounts are recorded with journal entries like the following one:
AccountDebitCredit
Bad debt expense$15,000
Allowance for doubtful accounts$15,000
If the Allowance for doubtful accounts line is linked to a customer and the account is Accounts Receivable , it will impact the customer balance in NetSuite. As such, we import them as payments in Upflow, and they are visible to the customers on their portal. NetSuite offers several solutions, so it is no longer a problem:
  • Change the type of Allowance for doubtful accounts to Other Current Assets instead of Account Receivables (only lines on Account Receivables accounts affect customer balances).
  • Do not link the Allowance for doubtful accounts lines to a customer.
  • Link Allowance for doubtful accounts lines to a fake customer, only used to record bad debt.
This way, you will still be able to track the bad debt while maintaining your ability to collect on it.