How to Handle a Bounced Check from a Customer in QuickBooks

Non-sufficient funds (NSF) is a term used in the banking industry to indicate that a demand for payment (a check) cannot be honored because insufficient funds are available in the account on which the instrument was drawn. An NSF check is often referred to as a bad check or a bounced check.

When a customer’s check is returned for insufficient funds, perform the following steps in QuickBooks®

First, check to see if these items have already been set up in your QuickBooks file. Go to Lists, Item List and look for Other Charge Items called Bounced Check and Bounced Check Fee. If they are already on your Item List, you can skip step 1.

Step 1: Create items for tracking bounced checks and their associated charges: This is a one-time setup task.

  • Go to the Lists menu and click Item List
  • Click Items at the bottom of the list and then click New
  • Under Type choose Other Charge and name it “Bounced Check
    • In the Amount or % field, leave a zero
    • From the Tax Code list, choose Non (if you use Tax Codes)
    • In the Account field, select your bank account (for example, Checking)
  • Click Next.
  • Create a second Other Charge item titled “Bounced Check Fee” for the service charge you assess your customers for bouncing checks
    • In the Amount or % field, leave a zero
    • From the Tax Code list, choose Non (if you use Tax Codes)
    • In the Account field, choose Bank Service Charges
  • Click OK

Step 2: Use the items you created in Step One to re-invoice the customer for the bounced check, plus any bank fees you want to recover.

  • Click Customer Center
  • On the Customers & Jobs tab, select the customer with the bounced check
  • Right-click and choose Create Invoices
  • For the first line item on the invoice, use the Bounced Check item for the amount of the bad check

*Note:  Because this item is linked to your bank account, this will reduce your bank account by the amount of the bounced check.

  • For the second line item on the invoice, use the Bounced Check Fee item for the amount of any bank fees that you want to recover from the customer
  • Complete filling out the invoice as usual

Step 3: QuickBooks® has a Bounced Check Letter that you can send along with the new invoice

  • Select the customer in the Customer Center
  • Go to the Word menu at the top of the Customer Center and click Prepare Letter to Customer
  • Follow the onscreen instructions in the Letters and Envelopes wizard
  • In the Choose a Letter Template window, choose Bounced Check

Step 4: Enter your bank’s bounced check charge when you reconcile your bank statement

When you reconcile your bank statement:

  • Include your bank’s charge for the bounced check in the Service Charge field
  • In the Service Charge Account field, enter Bank Service Charges

This article of QuickBooks Tips and Tricks was based on the 2012 version of QuickBooks.

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