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Bad Debts process in Business Central

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Posted on by CU04081252-0

Hi Experts,

How Bad debts are recorded in the Business Central? What is the process and how same can be applied against invoices. Please let me know the full process.

Thanks in advance.

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Dynamics 365 Business Central

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AndrewThomas81 2,157 on at

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There is no bad debt process.

You can create dispute statues and add these to customer ledger entries for traceability.

To write off a bad debt the practice is to raise a credit memo to your G/L Account for bad debt expense and apply that to all bad customer ledger entries

Kind Regards

Andrew Thomas
https://www.usebusinesscentral.com/
https://www.youtube.com/@usebusinesscentral

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RockwithNav 9,158 Super User 2026 Season 1 on at

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Hey mate,

What AndrewThomas81 recommended is one option to handle bad debts. Either way, we will need to write them off. Another approach could be to use a specific expense GL account where you want to record the adjustment. You can use the Cash Receipt Journal, select the customer and the corresponding customer number, and balance it against that expense GL account. Make sure to apply the invoices correctly.

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Valentin Castravet 32,755 Super User 2026 Season 1 on at

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You can create either a credit memo or a journal entry. The journal entry would debit a Bad Debt Expense G/L account and credit the customer account, and then you would apply the credit memo or journal entry to the original sales invoice. You can do the application at the time of posting or in the customer ledger entries. If you need to recover/reverse sales tax, a credit memo is probably the better choice.

Valentin Castravet
Work: Zander ERP Services
Blog: Dynamics 365 Business Central Insights
LinkedIn: www.linkedin.com/in/valentin-c-0500a247/

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YUN ZHU 101,787 Super User 2026 Season 1 on at

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Hi, If this doesn't involve items, you can create a Credit memo directly in Sales journals.

Thanks.

ZHU

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OussamaSabbouh 17,220 Super User 2026 Season 1 on at

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Hello,

In standard Business Central, bad debt is usually not a special one-click “bad debt process”; the normal way is to write off the unpaid customer invoice by posting either a general journal or a sales credit memo, using a Bad Debt / Write-Off G/L account, and then apply that entry to the open invoice so the customer ledger entry is closed. Typical flow: post the sales invoice as usual, decide the amount is unrecoverable, create a general journal with the customer account on one side and the bad debt expense/write-off account on the other side (or use a sales credit memo if that matches your accounting policy), post it, then go to Customer Ledger Entries and use Apply Entries / Set Applies-to ID to apply the write-off entry against the original invoice; after that the invoice is closed and the loss sits in the bad debt expense account. If you need VAT treatment, that depends on localization/tax rules, so sometimes an extra setup or separate correction is needed.

Regards,
Oussama Sabbouh

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Gerardo Rentería Ga... 27,054 Most Valuable Professional on at

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Hi, good day
I hope this can help you, and give you some hints.

Don’t use Credit Memos for Bad Debt Allowances in BC - Sharing The Righter Way - Cynthiapriebe.com

Microsoft Marketplace | cloud solutions, AI apps, and agents

Best Regards
Gerardo

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