What do you recommend is the best way to handle invoices that are never going to be paid?
This is usually handled as a Bad Debt Write-off using a journal entry
Create an Expense account Bad Debt Write-off if you want to detail it in your P & L
Debit the Bad Debt Write-off account or another expense account
Credit the Accounts Receivable/Customer account
Thank you. Now that I have done that, there still appears an alert on the “Sales Invoices” tab stating that there is at least one invoice with a pending late fee. Is there a way to make that alert go away?
There is a Guide about writing off bad debts: https://www.manager.io/guides/14465.
Edit the sales invoice by unselecting the late payment fees box. Late payments fees already applied to the sales invoice by the date you write off the bad debt will not be affected. You will write them off by writing off the balance due on the invoice. Therefore, you should go through the addition of late payment fees as many times as necessary to apply all your late payment fees before writing off the debt and unchecking the box. See https://www.manager.io/guides/14465 for more information about late payment fees.
You might ask why you should bother applying the late payment fees if you are just going to write them off. The reason is that, under the terms of your agreement with the customer (as stated on the invoice), you are entitled to the income of the late payment fees. Foregoing them is a legitimate business expense. Including all the unpaid late payment fees properly reflects your business performance, even though your net income will not change. (The additional late payment fees will be added to income, then subtracted as part of the bad debt.)
Thank you very much.