Handling Returned Checks

I was helping a client the other day with a few miscellaneous questions that she had, including how to handle a check from a customer that bounced. Unfortunately, this is an issue most businesses will have to deal with at some time.  The problem for many clients is how to show the check being returned yet not affect the original deposit, which often contained multiple checks.  You don’t want to change the original deposit – that is what actually went in.  There are two ways you can handle this in QuickBooks.

The quick and easy way is to use the Write Check feature. 

  1. Either click Write Check from the Home Page or click on Banking, Write Check.
    • Enter the customer’s name in the Payee field
    • Enter amount of check being returned 
    • On the Expense Tab, use Accounts Receivable.  You will also need to select the customer who’s check bounced in the Customer:Job field
  2. If you want to charge the client a fee for the bounced check, then create an invoice for that fee.
  3. When the check is redeposited, receive the payment and pay the amount that you entered in A/R using the Write Checks.

Now when you run an aging report or Open Invoices, this will show up on the list. The problem with this method is that there is no due date, so it will remain current.   The second method is more involved, but addresses this issue.

  1. First, you will need to set up 2 new items in your Items List – this is a one-time step. After this, you’ll just have step 2.
    • Set up an item for checks that are returned
      1. Click on Lists, Item List
      2. Right-click and select New
      3. The type is Other Charge
      4. Enter a name like is Bounced Check or Returned Check
      5. Description is Bounced Check or Returned check – whatever you want to use for a description
      6. Leave the amount blank
      7. Tax Code – it’s not taxable, your code is probably Non
      8. Account is the bank account where you originally deposited the check (usually your operating account)
    • Set up an item for the fee you want to charge for the returned check
      1. In the Item List, right-click and select New
      2. The type is Other Charge
      3. Enter the name, such as NSF Charge or Bad Check Charge
      4. Enter your description
      5. Leave the amount blank
      6. Tax Code – it’s not taxable, your code is probably Non
      7. Select or create an income account – could be Miscellaneous Income or Returned check charges, etc.
  2. Create an invoice for the customer showing the returned check and the check charge.
    • Click on Customer, Create Invoice
    • Select the Customer’s name
    • Date is the date the check was returned
    • Select your terms of payment, such as Due on Receipt
    • Your first item will be the Returned Check item and the amount of the check
    • The next line is charge for the returned check and the amount
    • Add a message if desired
    • Click on Save & Close

 Hopefully handling returned checks will be a rare occurrence for you.

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One Response to Handling Returned Checks

  1. Seth David says:

    Hi! Great post! I’ve had many people come to me and ask me how to do this and I’ve also seen too many situations where a bookkeeper has simply deleted the item that was returned from the deposit. Oops!

    Here’s a great video tutorial on how this looks:
    http://nerdenterprises.acrobat.com/p25532262/

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