How to Handle Non-Sufficient Funds (NSF) or Bounced Checks from Customers

Non-sufficient funds checks is an obvious fact in business and QuickBooks users have experienced it. Hence, it is important to learn how to record bounced or non-sufficient checks in QuickBooks Desktop for Mac and Windows.

Not to mention, You can record the bounced checks from your clients manually too. QuickBooks makes sure all the concerning details on bounced check transactions are addressed in order to keep your account well-documented and balanced.

Before we learn how to handle such checks, let’s learn in detail what non-sufficient checks are.

What Are Non-Sufficient Funds (NSF)?

Insufficient fund is a condition of an account that lacks adequate money to meet all the transactions. NSF also mentions a charge that is applied when a check is displayed, however, it cannot be met due to the low balance in the account.

Customers will encounter a non-sufficient funds notice on a particular bank statement while trying to draw out more funds from the account they possess.

When a payment does not get completed, it is usually considered as bounced. In case a bank gets a check from an account that has inadequate funds, the bank can turn down the payment and can levy a charge on the particular account holder as an insufficient funds fee. Not to mention, a fee will be implied by the merchant for the particular returned check.

How to Enter Non-Sufficient Funds in QuickBooks?

When your bank account doesn’t have enough cash to cover the check’s amount or has non-sufficient funds (NSF), the check will bounce. In this scenario, your bank imposes a bank fee or an NSF. How you control the fees goes on to show your approach to accounting.

If a check does come back NSF, QuickBooks has a Bounced Check tab on the record of every previous transaction. So, you can just click that button. On a new invoice, the fee to your bank and the fee to the consumer are combined.

Tracking the NSF Check

To keep track of the NSF check, you have to adhere to the following steps:

Step 1: Go to the QuickBooks home page and click the “Receive Payments” icon.

Step 2: To discover the transaction related to the bounced check, click “Previous” a few times.

Step 3: Select “Bounced Check” from the menu. In the text box labeled “Bank Fee Charged to You,” enter the sum your bank charged you for the returned check.

Step 4: If you want to administer your service charge to the customer, choose the “Charge Customer for Fee” option, and then enter the payment you want to charge. Next, You click on “Save and Close“. You add together the bank’s fee to you and your fee to the client. QuickBooks generates an invoice for the whole amount.

What Are the Steps for Invoice Workaround?

If you plan on working around the invoicing, then you should abide by the steps mentioned below:

Step 1: From the Lists menu in QuickBooks, choose “Item List.” Select “New” under “Items” from the drop-down menu. The purpose of this empty item is to track the bounced check.

Step 2: Choose “Other Charge,” then give it the label “Bounced Check.” Select “None” from the Tax Code menu and leave the “Amount” column blank. Click “Next” after choosing your bank account from the “Account” tab.

Step 3: To create a second Other Charge item called “Bad Check Charge,” follow the same procedure as before. This item is used to monitor the cost of your bounced check. Set the Tax Code to “None” and leave the Amount blank. In the Account section, choose “NSF Charge” as your income account. Click “OK” after creating an account if you don’t already have one.

Step 4: From the Customers menu, choose “Customer Center.” Select the customer whose check bounced by clicking the “Customers & Jobs” tab. Choose “Create Invoices” by performing a right-click on the customer’s name.

Step 5: Use the NSF check’s amount on the first line of the invoice’s “Bounced Check” item. You will notice that the books are balanced as a result of the corresponding decrease in your bank balance.

Step 6: Enter the value of the bank fee you were charged under the “Bad Check Charge” item on the second line of the invoice. Publish the invoice.

Now various scenarios might occur as a result of the check bouncing. These have been covered below.

How to Handle Bounced or Non-Sufficient Funds Check from Clients in QuickBooks?

earn how to record bounced or NSF checks from customers in QuickBooks Desktop for Windows and Mac.

QuickBooks for Windows

The record bounced check feature in QuickBooks is accessible only in single-user mode. It applies only to check payments that are done via the Customer Payment Window. In case you sent an ACH item, change the payment mode to Check prior to starting with the steps.

Troubleshooting 1: Utilize the Record Bounced Check option

Step 1: Navigate to the Customers option and then choose Customer Center.

Step 2: Choose the Transactions tab and then select Received Payments.

Step 3: Press the payment twice that you wish to register as NSF.

Step 4: On the particular Receive Payment screen, choose the icon Record Bounced Check available on the Main ribbon tab. You must ensure that the check is not scheduled to be cleared in the Undeposited Funds account, since it would have cleared the bank to bounce.

Step 5: In the screen for Manage Bounced Check, type the details provided below and then choose Next.

You must keep a note that all the provided fields are an option. You can leave them blank if you do not wish to charge your customer for that.

Here are the details:

• Expense Account for the Particular Bank Fee
• Customer Fee
• Bank Date and Fee
• Class

Step 6: QuickBooks will display the particular Bounced Check Summary for you to understand what will occur behind the scenes. For instance, you will see:

• The following charges will be applied to your bank account.
• The following invoices will be ticked as unpaid.
• The invoice will be generated for the fee you wish to levy on your customer.

Step 6: Choose Finish

Troubleshooting 2: Record the Bounced Checks Manually

Step 1: Make an Income and Item Account in Order to Track the Bounced Checks and the Related Charges

• Enter: Income Account
• Account Name: Bounced Check income
• Enter: Bad Check Charge
• Amount: 0.00
• Tax Code: Non-taxable
• Account: Choose Bounced Checks Income

Step 2: Prepare a Journal Entry in Order to Reverse the Original Payment.

Step 1: From the provided Company Menu, choose Make General Journal entries.

Step 2: In the given General Entries screen, all the account receivables should be debited for the same amount number of the NSF check.

Step 3: Add a note in the Memo column giving details of the transactions.

Step 4: Choose the customer’s name or job linked with the NSF check in the given Name column.

Step 5: Credit the bank account that accepted the actual deposit.

Step 6: Choose Save and Close.

Step 3: Shift the Payment for the Particular Invoice to the given Reversing Journal Entry

Step 1: In the Reports menu, choose Customers Receivables and then select Customer Balance Detail.

Step 2: Click the original payment twice for the particular NSF transaction.

Step 3: In the screen for Receive Payments, shift the check mark from the invoice to the particular reversing journal entry.

Step 4: Press Save and Close.

Step 4: Resend the open Invoice

Step 1: Navigate to the invoice to the place where the bounced check commenced.

Step 2: Add the Bad Check charge.

Step 3: Choose the Email icon on the particular Main ribbon tab and then select Send.

QuickBooks Desktop for Mac

Step 1: Navigate to the Customers menu and then choose Receive Payment.

Step 2: Find the check and then open it. Now choose Bounced Check.

Step 3: Finish the info required. Make sure that for the bank fees, QuickBooks makes a bank service charge expense account in case you do not have any.

Step 4: Choose Next. You will witness a short explanation of what will happen with the invoice check along with the bank fees.

Step 5: Choose Record. The invoice is now outstanding and unpaid. It also comprises a Bounced Check fee for your client.

We hope, you are clear about how to handle non-sufficient funds or bounced checks from customers. We have explained all the steps and possible scenarios to handle this issue with ease.

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