Handling a Non-Sufficient Funds (NSF Check) in QuickBooks Online (Manual Process)

Dan DeLongKnowledgebase, Quickbooks Desktop, Quickbooks OnlineLeave a Comment

Uh Oh!! A customer paid you and the payment didn’t go through. In the old days we called that a Bounced Check, but today, we have a softer way to call it, an NSF Check (non-sufficient funds). This can happen for a variety of reasons, but essential there is not enough funds in the checking account when the money is attempted to be withdrawn. This is a challenge because you have already attempted to deposit the money and the reality is that the bank will withdrawal that amount from your account, plus a fee and your client still owes you for the original payment. You can decide to charge your client for any fee that you incurred when they pay you again. But how do you track that in QuickBooks?? Fortunately QuickBooks Desktop has a built in Bounce Check Feature, automatically handled for you. If you are using QuickBooks Online, you will need to record this manually, Here are the steps.

In order to account for this properly we are assuming the payment is recorded as deposited in the Bank in QuickBooks. You should record it in order to match the reality what happened in the bank account which will make your account reconciliation match.

There are a few thing to set up ahead of time in order to track this

Create an Other income, Other Current Asset account, and an item to track the bounced check and their charges. (If you’ve already set this up, skip to the next step)
  1. Create two new accounts on your chart of accounts
    1. Type:Other Income Account Name: NSF Check Income
    2. Type: Other Current Asset Name NSF Check
  2. Create a NSF Charge Item on your Item list or Product/Service List
    1. Type: Other Charge or Service
    2. Name: NSF Check Charge
    3. Amount: Leave at $0.00 as the charge may vary from financial institution
    4. Income Account: NSF Check Income
  3. Created a NSF Check Item on your Item List
    1. Type: Other Charge or Service
    2. Name NSF Check
    3. Amount: Leave Blank
    4. Income Account: NSF Check Asset Account
Create a Check to reverse the Original Payment.
  1. Create a new Check
    1. Enter the date the funds were withdrawn from your bank account
    2. Enter NSF Check Asset Account
  2. Save the Check
Record the NSF Bank fee that you were charged (if applicable)
  1. Go into the register of the bank
  2. Enter a new transaction the date of the withdrawal.
  3. Enter the amount of the charge in the decrease column.
  4. Enter NSF Check Charges (Other Expense) expense account
Create A new Invoice for the customer.
  1. Create a new invoice for the customer.
  2. Add the Returned Check Item.
  3. Enter the Date the same date as the withdrawal from the bank.
  4. Add the NSF Check Charge Item and enter the amount of the fee you are charging your client.

NOTE:You can skip step 4if you are not charging the customer, or there wasn’t a fee from the bank

When the new payment comes in, you can record and apply it to the new invoice

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