Record a returned payment or bounced check in QuickBooks Online

Learn how to use an expense to record a customer's bounced cheque in QuickBooks Online. Or follow these steps if you need to record one of your own bounced cheques.

If a customer's cheque bounces, there are a few ways to handle the accounting. Review the overview guide so you know what's involved. Then follow these steps. You'll use an expense to create a record, balance your accounts, account for any bank fees, and send to your customer.

Note: These steps are complicated. If you're unsure, reach out to your accountant. This can get tricky and they know how to handle the next steps. Don't have an accountant? We can help you find one.

Step 1: Recategorise the bounced payment to reopen the original invoice

First, recategorise the bounced payment to reopen the invoice. This action will create an expense, accounting for the deducted money and keeping your records accurate.

1. Sign in to your QuickBooks Online account.
2. Go to Transactions, then select Bank transactions (Take me there).
3. Find the bounced check or returned payment in the bank feed. Select it to expand the transaction details.
4. In the Supplier/Customer ▼ dropdown, choose the customer whose payment bounced.
5. In the Category ▼ dropdown, select Debtors (Accounts Receivable).
6. In the VAT field, select No VAT.
7. When you're done, select Add.

This offsets the unpaid invoice. If you don’t have a bank connected to QuickBooks or the returned payment has not shown up yet, you can make an expense for this transaction and then match it to your bank at a later time.

Step 2: Unapply the bounced cheque payment from the original invoice

1. Go to Sales, then select Customers (Take me there).
2. Find and select the customer whose payment bounced.
3. Find the invoice for the bounced check and select Edit.
4. Select Receive payment.
5. Uncheck the box for the invoice that the payment had been applied to.
6. In the Credits section select the new expense you created in Step 1.
7. Select Save and close.
8. You may see a message if the transaction is linked to others. Select Yes.

Step 3: Create an invoice for the bank fees to charge your customer

1. Select + New.
2. Under Customers, select Invoice.
3. Select the Add customer ▼ dropdown and choose the customer whose payment bounced.
4. For the Invoice date, use the date the bank charged the fees.
5. In the Product/Service column, select the service Bank Fees Charged to Customer. If this service doesn’t exist:
   1. Select +Add new.
   2. Select Service as the type.
   3. In the Name field, enter Bank Fees Charged to Customer.
   4. In the Income account ▼ dropdown, select Other Income. If you don’t see this income account, select +Add new to add it to your chart of accounts.
   5. Select Save and close.
6. Enter the amount you want to charge the customer for the bounced payment.
7. Select Save and close.

Step 4: Send a Statement to your customer

1. Go to Sales, then select Customers (Take me there).
2. On the Customers tab, select the name of the customer who issued the bounced check to open the Transaction List.
3. In the New transaction ▼ dropdown, select Statement.
4. In the Statement Type ▼ dropdown, select Balance Forward.
5. Set the Statement Date, Start Date, and End Date.
6. Select Print or Preview to make a copy of the statement, or select Save and send to email the customer with the statement attached.

After you forward the statement to your customer, they know what they owe and why. The statement tells them there's still an open invoice and a second invoice to cover the bank fees and any fees you're charging them for the bounced cheque.

Once they pay you for the original invoice and the bank fees, you can follow the normal steps to receive their payment.