How to Record a Bounced Check in QuickBooks Online

Cody Cromwell
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What a Bounced Check Is

While it’s quite rare, sometimes a check is written that bounces. Why is that? Perhaps you sent the check to the wrong person or to the wrong bank account. Or perhaps you gave the check to the wrong person, or perhaps the check is just lost in transit. Based on the original check number, QuickBooks Online can track the details of what happened and where.

In QuickBooks Online, you can create a tracked check, which is a type of transaction. When a check gets returned for insufficient funds or if it is returned to you for some other reason, create a tracked check.

The important difference between bounced checks and non-bounced checks is that the bounce start date and end date are added to the transaction. With a bounce and a transaction, you gain much more information to help understand the original transaction.

To create a bounced check:

Create a new transaction; in the Search column, type in the check number and search for it; in the Transaction column, select the appropriate transaction type.

In the check, add the following information:

in the Payee Name field, enter the name of the check’s payee;

The Importance of Recording a Bounced Check in QuickBooks

As a small business owner, one of the best ways you can keep track of your cash flow is by keeping a close eye on your accounts receivables and payables. Although it’s easy to track the status of your current receivables and payables, taking the time to review all your previous transactions can be extremely important. And while those accounts might be easy to track otherwise, occasionally one will bounce. But if you’re quick to record this status change in QuickBooks, you can keep your business from running into trouble.

So are you left wondering, what exactly is a bounced check, how do you know if your transaction has been recorded properly, and can you do anything about it if you’ve missed a bounced check? Let’s take a look at some of the answers to these questions.

Paying a Returning Deposit

Imagine you’ve just recently paid for a rental deposit with a check. But a few days later, the tenant returns your deposit because the business you’re renting the space from has closed, flooded, or otherwise gone bust—in other words, everything’s a mess.

If you don’t record this status change in QuickBooks, you’ve just created a big problem for yourself.

How to Record a Bounced Check in QuickBooks Online in 4 Steps

When a check bounces, most banks require you to send them a copy of the written notification of the return of the check. This written notification is referred to as a stop payment order and you can find the required form in your banking application.

For example, if you receive a check from your employee/payroll service that says Please Stop Payment on the check, you must complete this form. Please make a copy of this form and keep it with your check records.

In your banking application, you will also find the Stop Payment form to fill out if you wish to stop payment of any check immediately without having to fill out a written notification.

Regardless of which written notification form you use, it is important to keep a copy and make sure that you scan it into your check register. This way, you will have a back up and you will be able to get a copy of the form if needed. There may also be a fee associated with the returned check.

If your check bounces, you will receive a copy of the written notification from the bank. The copy will contain information about your transaction. If you are unable to retrieve your copy of the written notification from your bank, you can find the required form on the bank’s website. When you find the form, you must scan it and email it to Wallyswiss via email.

This procedure should be completed as soon as you receive the form.

Record the Decrease in Bank Balance

If your bank statement shows a decrease in your account balance, then you will need to record this decrease. If your bank statement shows a small decrease in your account balance, then you should record a complete zero balance.

To record the decrease in your account’s balance, follow the steps below.

{1}. Navigate to Transactions in the QuickBooks Desktop software.
{2}. Select the transaction with the check that has the decrease.
{3}. Press the <Click Here To Record> button.
{4}. Click the drop-down arrow to select the Account from which you wish to record the decrease (i.e. bank account).
{5}. Select Balance as the Journal Line. You can also enter the amount of the decrease.

Reopen the Original Invoice

Easily access the original invoice from where you recorded the bounced check transaction. To reopen, click on the Customer QuickBooks menu logo in the upper right-hand corner and select Reopen Invoice from the drop-down menu.

Next, click the selected open the Invoice New window.

Scroll to and select the desired open date (or the date of the original transaction).

Click Add Line and begin entering the details of the new transaction, one line at a time.

Quicken 2016 may require you to enter the current date in the transaction date and click Save Now.

Finally, click on the Save button at the bottom, and your account balance will update.

Record the NSF Fee

A bounced check is a check that fails to clear upon deposit. There are many reasons why a check could bounce. It could be that the check issuer did not have enough funds in the account to cover it, or it could be that the check was returned for insufficient funds. In either case, the account on which a bounced check was written will be charged a fee by the bank that issued the check.

When you record a bounced check in QuickBooks, you are notified that you need to collect the fee from the account. In QuickBooks, this can be done by clicking the Other tab and selecting the option to collect the fee cost as an expense.

Be sure that you have the proper check register set up … the column must include a Bank Statement Account. You also need to have a Check Charge Off Register set up properly. If you would like to learn more about how to set up these registers, you can refer to my post on Organizing Your Check Register.

Bill an NSF Fee

If a charged check was returned to your bank, you’ll need to bill the NSF fee to the customer. When you bill a NSF fee to a customer, QuickBooks Online lists the item as Uncollectible.

Go to the customer and select the Unpaid Invoices tab. Under the Uncollectible Invoices section, select the check that you charged a NSF fee to.

Click on the Bill Cont. button.

Change the Bill Type from NSF fee to Other Fee.

In the Other Amount field, enter the NSF fee amount.

In the Memo field, enter the reason for charging the NSF fee. You can also link to a previous invoice to help support and back up your claim. If the invoices were generated by a third party, alert your client to the fact that you are billing the NSF fee.

Click OK.

Wrap Up

The third half of the year is a time to reflect on your work and to take stock of your own finances to see what you are doing right and what you need to work on. A Bounce Check is a selling feature in the QuickBooks Simple Start package. That is a very basic and very inexpensive software package. The QuickBooks packaged is for those who are new to QuickBooks, and if you have never heard of QuickBooks, you are probably in one of those situations.

QuickBooks is the retail industry’s leading, integrated business management software that provides a complete financial view to help businesses run more profitably. Using QuickBooks as a stopping point to a financial life should be your goal.

In this post I have told you how QuickBooks is doing in a very condensed manner. The same online resources are available for you to respond to indepth detail.

We have shared a number of emails that you should save and use as a reference if you do happen to be in a situation like this. If you have a business in the mid to long-term future, I would suggest you watch or listen to the following tutorials, books, and performances and study them to ensure you are confident you will be able to handle a Bounce Check – and much more.