What is the impact on financial statements after making a customer inactive?

When a customer is made inactive in QuickBooks Online, it does not automatically write off any open balance as bad debt; rather, the correct impact on financial statements is that they remain unaltered.

Making a customer inactive primarily serves as an organizational tool, helping to keep the customer list tidy and manageable without affecting the underlying finances. The customer’s historical transactions, including any outstanding balances, are retained for reporting and reference purposes.

While it might seem intuitive to think that making a customer inactive would lead to a write-off of their open balance, this does not happen automatically. Actual write-offs require separate accounting entries to adjust the accounts receivable and recognize bad debt, which is not a direct result of simply inactivating a customer. Therefore, financial statements remain unchanged because the records of previous transactions stay intact.

On a more practical level, making a customer inactive means they won’t show up in lists for new transactions, helping businesses maintain clarity and focus, but does not impact the financial status at that moment.