As a business owner, few things make smoke come out of my ears faster than when a customer’s payment is returned by the bank. In today’s world of online payments, phone apps, Square, and other electronic means of collecting payments from customers, this is not as prevalent today as it was just a few years ago. So, when it does happen, it is that much worse.

To record this glorious event in your company books, there are four separate transactions we need to consider.

  1. Remove the customer payment from your book’s bank account
  2. Record the fee charged by your bank
  3. Record the invoice as unpaid.
  4. Apply a fee to your customer’s invoice to recuperate the bank fees.

Luckily, QuickBooks has a system in place to do all this for you with a few button clicks. Before doing that, make sure the transaction meets these criteria:

  1. You are using QuickBooks Desktop 2014 or newer.
  2. The payment was recorded in QuickBooks using the Customer Payment screen. This feature does not work if the payment was recorded using the Sales Receipt screen or the Banking > Make Deposits window.
  3. It must be a check and not a credit card payment
  4. It was recorded as a deposit, in the Banking > Make Deposits window.

Step No. 1 –Find the payment in the Customer Payment window and click the Record Bounced Check button on the tool bar.

Step No. 2 – Post the charges. The first screen in the Bounced Check Wizard asks how much your bank charged you for the bounced check. Enter that amount in the bank fee, the date, and the expense account to post this, usually bank service charges. Next, enter the amount you want to charge your customer for the Bounced Check. $50 is a fine fee, but I tend to adjust my fee to the customer based on the amount of smoke protruding from my ears. The thicker the smoke, the higher the fee.

Step No. 3 – Review the transaction before clicking Finish.

The original invoice to your customer will be marked unpaid.

The bounced check and bank fees will be deducted from your bank account register

A new invoice will be created for the fee to your customer.

Click Finish and it’s all done for you. Now, this may not make you feel any better about the Bounced Check from your customer, but at least this relatively new feature in QuickBooks will make the recording of the transaction a little less painful.