What To Do When a Customer’s Check Bounces

When a customer bounces a check, it must be handled in QuickBooks. In versions earlier than QuickBooks 2014, there is no icon to click or menu selection to make that reads “Bounced Checks”. So, we must create a procedure of our own. Here is the best way to do it.

The notice that comes from the bank has two charges. One is a service charge for the bounced check, the other is the amount of the check itself.

Our customer, Renee Barley, bounced a check for $400.00. With a $15.00 service charge, we need to deduct $415.00 from our checking account. You can see how that was handled below.

Where the $400 check is deducted in the register, note that the customer name is used and the Expense Account is Accounts Receivable.

The next step is to find and open the Customer Payment transaction in QuickBooks that was created for this particular check. The easiest way to do that is to go to the Customer Center, select the customer, and find the transaction.

 

You can see the Customer Payment transaction has been found. Double-click on this transaction to view the full Receive Payments window. Your screen should look like this:

Note the charge in the check register made earlier now shows in the window with the invoice that the original payment was used to pay. What we are going to do is to remove the checkmark on invoice #1021 and apply the payment to the second line. After that is done, the same window should look like this:

 

 

Now just click save and close.

This procedure will protect any bank deposit that included this payment, it will protect any bank reconciliation that may have been done clearing that deposit, and it restores the customer balance, with the original due date, so that finance charges will compute correctly and statements and reports will show the correct aging of the invoice.

What about charging the customer a fee for the bounced check?

In order to charge the customer a fee, simply create an invoice charging them for it. In order to create the invoice, we must have an item to use on the invoice.

 

In this example, the QuickBooks user chose to post the fee to an expense account, offsetting other bank service charges. You may want to use an Other Income type of account. Either method works.

Create an invoice for the customer using the new NSF Fee item and charge the appropriate amount. It is, of course, non-taxable for sales tax purposes.

When the customer replaces the check, there will be nothing out of the ordinary you will have to do. Simply process the new payment as normal. The open invoices will show in the Receive Payment window just like a payment from any other customer. Apply the payment and include in the next bank deposit just like normal.

Hector Garcia, CPA
hector@garciacpa.com

Hector Garcia CPA and QuickBooks/Excel Trainer

Hector Garcia CPA and QuickBooks/Excel Trainer

Share on linkedin
Share on facebook
Share on twitter
Share on whatsapp
Share on email
Share on print

Use our link to get 30% off for a year, valid through 07/31/2022

Leave a Reply

Your email address will not be published.



Popular Courses

Private QuickBooks Training onsite

Customized Training

Accounting & Bookkeeping Services

Video-Based Virtual QuickBooks Course

Share

Share on linkedin
Share on facebook
Share on twitter
Share on whatsapp
Share on email
Share on print

30% Off QuickBooks

Use our link to get 30% off for a year, valid through 07/31/2022