How to Deduct a Bad Check in QuickBooks
When a customer bounces a check, you may have a laundry list of procedures to follow, such as contacting the customer, contacting the bank, attempting to collect the payment and deducting the payment in QuickBooks. The latter task may be the simplest one to perform, as the accounting software provides a method for doing so that includes recording bank fees, creating a credit memo and sending the customer an invoice for the current amount due.
Create items that track bad checks and their fees if you have not already done so. Select the "Lists" menu and choose "Item List." Select "New" in the "Item" drop-down list. Select "Other Charge" in the "Type" drop-down list, and then enter a name for the item, such as "Bad Check." Change the "Tax Code" to "Non," and leave "Amount or %" at zero. Choose your bank account from the "Account" drop-down list, and then click "Next." Repeat to create items for bank charges or other fees. Click "OK" to save the new items.
Record bank fees. Select the "Banking" menu, click "Use Register," choose the associated bank account, and then click "OK." Click "New Transaction" and enter a name for the transaction, such as "Bad Check Fee." Type the fee amount into the "Payment" field, enter the income account associated with the item, and then click "Record."
Reverse the sale with a credit memo. Select the "Customers" menu and click on "Create Credit Memo/Refunds." Enter each line item from the original sale. Add sales tax and note the sales rep's name, if desired. Enter the item you created to track bad checks. Enter the total amount of the items and sales tax as a negative amount so that the credit memo total is zero. Click "Save and Close."
Create a new invoice to send to the customer. Select the "Customers" menu and click on "Create Invoice." Enter each line item on the original invoice, and include a new line listing the bad check fee. Print the invoice to send to the customer, and then click "Save and Close."
If you are using QuickBooks Pro, Premier or Enterprise Solution, you can use the bad check form letter provided in the Microsoft Word Letter templates.