Product Tips

Handling Customer NSF Checks By: Dawn Ashpole, Advanced Certified QuickBooks ProAdvisor Product: QuickBooks Tip Category: Best practices

Situation

Your client has received a notice from the bank that a customer's check has been returned, and is looking to you for advice on how to handle it.

Background

(Note: Attached is a brief PDF version of this tip that you can attach to an email and send to clients.)

Receiving an NSF check from one of your customers can be an unfortunate reality of doing business.

Response

You need to take the monies out of your checking account and also put it back on the customer's account to show that they still owe you. The best way I've found to handle it is as follows:

1. Create an Other Charge Item called Bounced Check or NSF. In the description field I usually say something like "Your check # has been returned, please remit replacement payment immediately." For the Account enter your Checking account.
2. Now, Invoice the customer for the Item Bounced Check and enter in the check #, Invoice # and other information about the check. This takes the money out of your checking account and puts it back on the customer A/R
3. I usually also create an Other Charge Item called NSF Fee and charge my customer for any service charge I received from my bank. You can put this to your account for Bank Service Charges to offset what your bank charged you or to a Misc. Income account.
4. When the customer sends a replacement check, Receive Payment as usual and make your deposit.

Don't Delete!

Despite the temptation, you really don't want to delete the returned check from the original deposit.

Why keep the record? You did deposit the check and that can't be changed. You want to preserve an accurate historical record. The above instructions allow you to keep your original deposit intact, subtract the amount of the returned check from your checking account and record who owes you for the returned check.

Last Updated: 04/29/2009

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