QuickBooks: Handling Customer Bounced Checks

There are still a number of companies and individuals today that issue paper checks to pay their customers creating the possibility you may be notified of a bounced check.  In this event, follow the steps below.

Create Items to track bounced checks and their associated charges

  1. Go to the Lists menu and click Item List.

  2. Click Items at the bottom of the list and then click New.

  3. Create an “Other Charge” item titled “Bounced Check”.

    a. In the Amount field, leave a zero amount.

    b. From the Tax Code list, choose Non.

    c. In the Account field, choose your bank account (for example, Checking).

  4. Click Next.

  5. Create a second “Other Charge” item titled “Bad Check Charge” for the service charge you assess customers for bounced checks.  Use this item when you re-invoice the customer to recover the service charge.

    a. In the Amount field, leave a zero amount.

    b. From the Tax Code list, choose Non.

    c. In the Account field, choose an income account, such as Returned Check Charges.  If the account does not exist, set it up now.

  6. Click OK.

Re-invoice the customer

  1. Create a new invoice for the amount of the bounced check, plus any bank fees to recover.

             a. Use the date the check bounced as your invoice date

             b. Terms should be “Due Upon Receipt” since the amount is most likely now overdue.

             c. For the first line item on the invoice, use the Bounced Check item for the amount of the bad check. [Because this item is linked to your bank account, this will reduce your bank account by the amount of the bounced check, thereby backing out the original transaction on your books]

             d. For the second line item on the invoice, use the Bad Check Charge item for the amount of any bank fees that you want to recover.

       2.  Contact the customer to advise them that their check bounced and suggest they use Bill Pay, ACH, or a wire to settle the replacement invoice more securely.  If you accept credit cards, this may also be an alternative but recognize that there will be processing fees taken from the payment.

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