How to record an NSF check entered as a sales receipt?

When a customer’s check is returned for non-sufficient funds (NSF), you need to reverse the original deposit and record the bank fees so your books match your bank statement. Then, you can reinvoice the customer for the amount owed plus any fees you want to recover.

Here is how to handle an NSF check in QuickBooks Online:

Step 1: Reverse the original payment

First, void the original sales receipt or payment to remove it from your bank register and reopen the customer’s invoice.

1. Go to Settings (gear icon) and select All Lists.
2. Choose Deposits.
3. Select the deposit containing the NSF check to open it.
4. Uncheck the box next to the payment line to remove it from the deposit.
5. Select Save and close.
6. Go to the Get paid & pay (or Sales) menu and select Customers.
7. Select the customer’s name to open their profile.
8. Find the original payment receipt, select it to open, and then select Void or Delete (Void is usually preferred for audit trails).
   • Note: This reopens the original invoice and marks it as unpaid.

Step 2: Record the bank fees

If your bank charged you a fee for the bounced check, record that expense so your register matches the bank statement.

1. Go to the + New menu and select Journal entry.
2. On the first line:
   • Account: Select your Bank account.
   • Debit: Enter the amount of the bank fee.
   • Description: Enter “Bank fee for NSF check from [Customer Name].”
3. On the second line:
   • Account: Select an Expense account (usually named “Bank Service Charges” or similar).
   • Credit: Enter the same amount as the debit.
4. Select Save and close.

Step 3: Reinvoice the customer

If you intend to collect the funds again, create a new invoice for the original amount plus any penalty fee you charge.

1. Go to the + New menu and select Invoice.
2. Select the customer.
3. In the Product/Service column, select the original item(s) sold and enter the amount of the bounced check.
4. (Optional) To charge the customer a penalty fee:
   • Add a new line in the Product/Service column and select Add new.
   • Set the Type to Service.
   • Name it (e.g., “NSF Fee”).
   • In the Income account dropdown, select an income account (like “Other Income”).
   • Select Save and close.
   • Back on the invoice, enter the fee amount you want to charge the customer.
5. Select Save and close.

This process clears the original transaction from your bank feed, accurately records your bank’s charges, and creates a new record for the debt the customer still owes.