Bad Debt applies to businesses running on Accrual Basis. One way to record Bad Debt is:

1. Create an Expense account called 'Bad Debt'

2. Create a service item in Product/Services named 'Bad Debt Adjustment' and connect to the 'Bad Debt' expense account

3. Add a line to the invoice that is not being paid and use the new Bad Debt Adjustment item; it'll be recorded as a negative number