How to Handle NSF Checks from Customers in QuickBooks

By Stephen L. Nelson

Many QuickBooks users ask questions about how to handle insufficient-funds (NSF) check transactions. This is never a pleasant situation, but it must be dealt with. Here’s a few tips for how you might handle the situation:

  1. Record the service charge that the bank charges you for handling the bounced check, just like any other bank service charge.

    You can enter a transaction directly into the register, for example. Or you can even record the bank service fee as though it’s a check that you just wrote. Anything coming out of your account is entered just like a check.

  2. Record the adjustment to your bank account balance because the customer’s check didn’t clear as a withdrawal or payment.

    You can use a bad-debt expense account to categorize the expense of the bounced check if you’re on the accrual basis for taxes; otherwise, cash-basis companies should directly charge their sales income account to reduce their income.

  3. (Optional) Try to collect on the check again.

    Try running by the customer’s bank. You might also try to assess the customer a bounced-check fee. But be honest: You’re probably not going to be able to collect, are you? So write a Note in the Customer’s master file that says not to take any checks. It will appear right in the middle of the Customer Center screen when you select that customer to record the next sale.

  4. Post a huge copy of the check in your cash register area so the customer’s friends and family see the check.

    This is just a joke, however tempting it may be.