Handling returned checks from customers
The Problem:
Revenue is often recorded twice for the same amount.
How to Handle:
Create two ‘other charge’ items, both non-taxable
Returned check – account is checking account
Returned check fee – account is other misc income or offset against bank service fees expense
When a check is returned create an invoice for the customer using the two items above. The amount for the returned check item should be the amount of the returned check. The fee item is the penalty you charge (if any). This will automatically deduct the amount of the returned check from your bank account and create a receivable for your customer for the new amount due.
When your customer pays for the returned check and the fee, simply receive the payment as usual against the new invoice you created.
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Very helpful and informative post Rachael - thank you!