How To Record a Bounced Check in QuickBooks Online

The customer invoice was marked as paid when the original check was received. However, now that the check has bounced, the invoice needs to be reopened and sent to the customer.

Navigate to customers by hovering over Sales in the left menu bar and then clicking on Customers.

Scroll down to find the customer whose check bounced and click on their name to open a list of their transactions. In the list of the customer’s transactions, locate the original invoice and the original payment received.

Click Closed (highlighted in the screenshot above) on the right side of the payment line to open the receive payment screen.

The Receive Payment screen applies check #100 to invoice #71166, which is no longer correct since the payment bounced.

To reopen the invoice, uncheck the box to the left of the invoice and check the box to the left of the check that was created in step one. Now, click the green Save and new button, and the invoice in the transaction list should show a status of Open or Overdue.

You can now email or print and mail the invoice to the customer, as discussed in our tutorial on how to create and send invoices.

Next, record the NSF fee charged by your bank. If this is the first time you’re recording an NSF fee, you should first create a Service Item so that the fee can be marked up and billed to the customer.

The details of adding Service Items are covered in our guide on how to set up products and services, but we’ll go over them here so that we can talk about the specifics applicable to setting up the NSF Fee.

Hover over Sales in the left menu bar and then click Products and services.

From the Products and services screen, click the green New button in the upper right corner to create a new product or service item. The Product and service information screen that appears after clicking New provides the four item types that can be created for products and services. Click on the third item, Service.

Here’s an example of how to complete the add service screen:

A. Name: Name the Service Item “NSF Fee” or something similar.

B. Sell this product/service tick box: Check the box indicating you sell this service to your customer. This will make it easier to add an NSF Fee to your customer’s invoice.

C. Description field: Enter a description of the charge you would like to appear on your customer’s invoice.

D. Sales price/rate: Input the amount you would like to charge your customers for a bounced check. This doesn’t necessarily have to be the same amount as the bank charges you. There’s nothing wrong with charging the customer for your inconvenience, but it’s a good idea to state your charge for returned checks at the bottom of all your invoices.

E. Income account: Select the income account where you want to record the fees collected from your customers.

F. Sales tax: Select nontaxable if NSF fees charged to clients aren’t subject to sales tax in your state.

Scroll down to complete the purchasing information for the NSF free service item.

G. Purchasing information tick box: Check the box to indicate that you purchase this product or service from a vendor.

H. Description field: Provide a description to appear on your internal purchase and expense forms.

I. Cost: Enter the amount of your bank’s NSF fee.

J. Expense account: Select the expense account where you want to record the NSF fee charged to you by your bank.

When you’re finished, click the green Save and close button.

Now that we have created a service item for the NSF fee, recording the expense of the fee will be easy. Open a new expense screen by clicking on + New at the top of the left menu bar and then selecting Expense, as done in Step 1.

Here’s an example of how to record the NSF fee for the sample scenario with Paul’s Plumbing:

A. Payee: Select the bank that charged you an NSF fee as the payee. If the bank isn’t yet set up as a customer, select Add New and provide the bank’s information.

B. Payment account: Select the account where the NSF fee was charged.

C. Payment date: Enter the date the NSF fee was charged to you.

D. Payment method: Select cash for the payment method.

E. Product/Service: Under Item details (not Category details), select the NSF Fee item you set up in the first part of this step. Once you select the item, the Description, Qty, Rate, and Amount will populate automatically based on the information you provided when you set up the item.

F. Billable: If you want to charge your client a fee for the bounced check, place a checkmark under Billable. This will populate the sales amount field automatically. This box must be checked for the charge to be available when you create a customer invoice in the next step.

G. Customer/Project: If you’ve marked the expense as billable, you must select the customer whose check bounced.

When you’ve finished entering the data, click the green Save and close button. If you want to bill your client for an NSF fee, then continue to Step 4. Otherwise, you’re done recording the bounced check activity.

The last step is to bill your customer an NSF fee, which is optional. Click on + New on the top of the left menu bar and then select Invoice under Customers in the first column.

A new invoice screen will appear. In the customer field, select the customer whose check bounced. A list of billable expenses will then appear to the right of the invoice. Locate the billable NSF fee you created in the prior step and then click Add.

The billable expense will populate the billing detail of the invoice automatically. Here’s the completed invoice screen for our example with Paul’s Plumbing:

A. Customer: Select the customer whose check bounced. After selecting the customer, all the other customer information fields will auto-populate. Of course, you can change them if needed.

B. Service information: This entire section gets populated automatically when you added the billable expense in the previous screenshot.

Click Save and send to finish the process. For additional information on saving, printing, and emailing invoices, review our previous tutorial on how to create and send invoices.