Why Deleting That Invoice Could Cost You at Tax Time [E238]

Thanks to our partners Promotive, WickedFile, Maverick Shop Owners, and Overdryve

Are you accidentally paying taxes on money you're never actually going to collect? Could the way you're deleting a bad ticket in your shop management software be costing you more than the deadbeat customer ever did?

This week's episode started as a text message. Hunt Demarest, CPA with Paar Melis & Associates, answers a question from fellow podcaster Chris Cotton of AutoFix Shop Coaching and The Weekly Blitz: how should shops actually handle bad debt? Hunt breaks it down from the ground up, what bad debt is, how cash versus accrual accounting changes the math, and why deleting or discounting a ticket instead of writing it off properly can quietly inflate your tax bill and hide real problems in your production numbers. He walks through the exact steps for building a "bad debt" payment type into your shop management software, how to automate the accounting through Back Office and Accounting Link (or handle it manually with a journal entry), and where chargebacks, bartering, and shop vehicles fit into the picture.

Whether you've never had a customer stiff you or you're staring down an invoice right now that you know you'll never collect, this episode is a practical field guide to keeping your books, and your tax bill, accurate.

What You'll Learn…

(00:00) Intro: Chris Cotton's bad debt question kicks off the episode

(00:46) Housekeeping: the book, the sponsors, and how to ask Hunt anything

(03:11) The four part question: where it goes, how it's recorded, and chargebacks

(05:28) What actually is bad debt: cash basis versus accrual, explained

(07:58) The tax trap: why ignoring bad debt means overpaying the IRS

(08:50) PSA: your AR is only as accurate as your shop management software

(12:21) The correct way to book a loss: sales, cost, and the bad debt line