How do I handle bounced checks in my bookkeeping?
When a customer’s check bounces, your bookkeeping needs to reflect that the payment you thought you received never actually cleared. The deposit you recorded is no longer valid, so you need to reverse it and track the amount as still owed.
Start by reversing the original deposit entry. If you recorded the check as a payment against an invoice or as income, that entry needs to be undone. In QuickBooks, you can create a bounced check entry that reverses the original deposit and moves the amount back to accounts receivable where it belongs. This keeps your bank reconciliation accurate and restores the customer’s outstanding balance.
Record the NSF fee your bank charges you. This is a legitimate business expense, typically categorized as bank charges or fees. Your bank statement will show both the returned check amount and the fee, and both need to be recorded to keep your books matching the bank.
You can also charge the customer an NSF fee. Michigan allows businesses to charge up to $25 for a first bounced check. Many businesses include NSF fee policies in their payment terms or contracts. If you decide to charge one, add it to the customer’s balance as a separate line item so the breakdown is clear when you follow up.
Follow up with the customer promptly. Sometimes checks bounce because of timing issues and the customer will make good right away. Other times you’re looking at a longer collection effort. Either way, accurate records of what’s owed and when the bounced check occurred help you track the situation and document your attempts to collect. Good accounts receivable management means nothing slips through unnoticed.
If bounced checks happen regularly in your business, consider accepting electronic payments where possible. ACH and card payments have their own fee structures but reduce the risk of returned payments and the bookkeeping cleanup that follows.
For businesses handling high payment volumes, working with a bookkeeping service in Macomb that understands payment tracking can help you set up systems to catch and handle bounced checks efficiently. The goal is clean books and no surprises when you’re reviewing what customers actually owe you.
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