This topic deals with how to handle a check written to you that “bounced”.
To handle a bounced check in Total Office Manager, we’ll first setup a couple of necessary new invoice items, one called “Bounced Check” and the other called “Bounce Fee”. When bounced checks happen, you will use these items to reduce the balance in the affected bank account and to show the amount due from the customer in your Accounts Receivable.
Setting Up the “Bounced Check” and the “Bounce Fee” Invoice Items
NOTE: Before proceeding, you may have to turn off “Smart Account Selection Filtering”. The Total Office Manager Administrator password is required to turn off this feature. From the main menu click Edit > Preferences and then click on the Chart of Accounts tab on the left side of the form. Uncheck the Smart Account Selection Filtering checkbox, read the important pop-up message, and enter the Administrator password. After setting up these new invoice items, it is strongly recommended to re-enable Smart Account Selection Filtering.
- From the main menu, click Lists | Invoice Items.
- Right-click and select New Item
- In the “Type” field, choose “Other Charge”.
- In the “Name/Number” field, enter “Bounced Check”
- In the “Description” field, enter something like, “Original Bounced Check Amount + Bank Fees”.
- Leave the “Amount” field set at zero, and leave the “$” radio button checked.
- Click the “Accounting” tab and set the “Income Account” field to the banking account where you deposit customer checks.
- Click the “Save & New” button. You will be notified that “The Income Account you selected is not of Type ‘Income'”. Click the “Yes” button and this invoice item will be saved anyway, then a blank form will automatically open, ready to create the other invoice item.
- In the new “Add Item” form, set the “Type” field to “Other Charge” just like before.
- In the “Name/Number” field, enter “Bounce Fee”.
- In the “Description” field, enter something like, “Bounced Check Fee”.
- Either leave the “Amount” field set at zero or enter whatever the standard bounced check fee is which you charge your customers. Once again, leave the “$” radio button checked.
- Click the “Accounting” tab and set the “Income Account” to whatever income account you use to track bounced check fees charged to customers. If unsure, ask your accounting professional for advice on which account to choose. Click the “Save & Close” button when finished.
What to Do When Bounced Checks are Returned to You
- When your bank returns a previously deposited check as “NSF – Non-Sufficient Funds” (or “bounces” a check), do the following:
- Create a new invoice for the customer (Customers | Create Invoices).
- Enter “Bounced Check” as the first invoice item. Enter the sum of the original bounced check amount plus any fees the bank charged you in the “Price Ea” field.
- Enter “Bounce Fee” as the second invoice item. Enter the amount you charge the customer in the “Price Ea” field if necessary. Save the invoice when finished.
- The General Journal can now be reviewed to verify how the accounts have been debited and credited. From within an open invoice, click the “Menu” button and select “Find in GJ”. Or, go to the main menu and click Customers > Invoice/Sale/Credit/Estimate List, then right-click on the invoice in question and select “Find in General Journal”. By using either method, the General Journal will appear and already have the first of the transaction entries highlighted for review.