To clear bad debt in billing, navigate to Billing and select the "Reconciliation" tab. 
Next, select the record containing the bad debt you would like to record and update using the "Edit Code" button. 
Enter "BAD" in the Edit Code box that appears.
Once you save your changes made on the "Reconciliation" page, run the report "056. Billing by Client - Unpaid - Excluding Non-Medicaid". This report will automatically remove records containing "BAD" as the code.