"I went to receive payments and put in 256.07 as a credit/discount and used the account bad debt. Is that all I need to do?"

I have an attached image that shows you why this is Not a good method to use. You just created Out of Balance reporting.

You create an Other Charge Type item linked to the account you want to track the Write Off against. The Tax forms call this "Returns/Allowances" and it is in the Income part of the tax form. This is called Contra-Accounting.

Use that item on a Credit memo for the customer name, and apply this to the Open balance, to close out that amounts.

"create a credit memo for the customer, use that bad debt item, enter the amount, save

in receive payments, select the customer, the invoice and apply the credit memo, save"

The Apply to Open Charges is right at the top of the Credit Memo; there is an icon already there. You don't need to go to Receive Payments, as well.