Record a returned payment or bounced cheque

If a customer's cheque bounces in QuickBooks Online, you can record an expense to balance your accounts. Then you attach the bounced cheque to the original invoice and send it back to the customer, along with a second invoice for any added bank fees.

Note: If you don’t want to expense the bounced cheque, you can record it with a journal entry. If you want help with this process, 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.

What you’ll need

• The amount of the customer’s cheque deducted from your bank balance.
• The amount your bank charged you in fees.
• A service item in QuickBooks for any bank fees you plan to charge your customer.

Record the bounced cheque expense

Create an expense to account for the money deducted from your bank account by the returned cheque.

1. Follow this link to complete the steps in product
2. Find the bounced cheque or returned payment in the bank feed. Select it to expand the transaction details.
3. In the From/To ▼ dropdown, select the customer whose payment bounced.
4. In the Account ▼ dropdown, select Trade and other receivables, and fill out any required fields.
   Note: If you don't see this account, select + Add new account to add it.
5. When you're done, select Post.

Remove the payment from the original invoice

Next, add the bounced cheque to the expense you just created. This will open the original invoice again.

1. Follow this link to complete the steps in product
2. Find and select the customer whose payment bounced.
3. Find the payment transaction for the bounced cheque and select View/Edit.
4. Select the payment made link. Note: If you do not see this link, you might be in the Receive Payment window. Please proceed to step 5.
5. Uncheck the checkbox for the invoice that the payment had been applied to.
6. Select the new expense you created in Step 1.
7. Select Save and close.
8. A message will appear stating that the transaction is linked to others. Select Yes.

Invoice the customer for bank fees

1. Select + New or + Create.
2. Under Customers, select Invoice.
3. From the Add Customer ▼ dropdown, select the customer whose payment bounced.
   Note: Select the Customer ▼ dropdown if you are using the old invoice layout.
4. Set the Invoice date to the day the bank charged you the fees.
5. In the Product/service column, select the service item you created for bank fees. If this service doesn’t exist:
   1. Select + Add new.
   2. Select Service as the item type.
      Note: If you don't see this option, select the type from the Item type ▼ dropdown.
   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.
7. Select Save and close.

Results

Your accounts now reflect the returned payment, and the original invoice has been reopened.

Next steps

Send your customer a Balance Forward statement to show them what they owe. This statement includes both the original unpaid invoice, and the new invoice for bank fees. When the customer pays, you can record the payment as you normally would.

Related links

• Add product and service items
• Record a returned or bounced customer check using a journal entry
• Enter and manage expenses
• Create and send customer statements in QuickBooks Online
• What to do if your cheque bounces and your bank account has non-sufficient funds
• Record invoice payments
• Add an account to your chart of accounts in QuickBooks Online