New QuickBooks 2012 Bounced Check Feature (and bug)

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New QuickBooks 2012 Bounced Check Feature (and bug)

Charlie Russell | April 3, 2012 | 0 Comments More

Intuit recently released QuickBooks 2012 R8 and one of the new features is a new procedure for dealing with bounced checks. Let’s take a closer look at this new feature to see what it is doing. I’ll also point out some bugs in the feature, along with workarounds. Note that this new feature will only be found in the “Plus” subscription versions of QuickBooks 2012 Premier and Pro, as well as the versions of QuickBooks Accountant that ProAdvisors have. Everyone else will have to wait for a later release – most likely QuickBooks 2013.

 

How do you deal with bounced checks in QuickBooks? There are several well documented approaches. For example:

  • QuickBooks Help has you create two special items in your item list, “Bad Check Charge” and “Bounced Check”. Create an invoice for the amount of the bounced check plus any bank fees you want to recover. You will add the bank charge when you reconcile your bank statement.
  • The Sleeter Group’s QuickBooks Consultant’s Reference Guide has a different approach, where you enter two transactions in your check register and create an invoice for the fee that you want to recover. It is more complicated than the one recommended by QuickBooks, but it provides better control and more accurate information in your Accounts Receivable aging.

Now we have a new method that works just by clicking a button. To see how this works, I’ve set up a brand new company file that I’ll use to create some simple test transactions.

Here is my starting Chart of Accounts. I’ve already entered an invoice for $500.00 and have received the payment.

Starting Chart of Accounts

Here is a Trial Balance:

Starting Trial Balance

Ah, darn it, the client bounced the check! If I go back to the Customer Payment window I see there there is a new button, Bounced Check. Note that this will only show if the payment method is “Check”.

Customer Payment window

If you click the Bounced Check button you’ll see a new set of fields to the left. You can enter the bank fee, and optionally enter a fee to charge your customer.

Bounced check information

If I save this transaction, QuickBooks displays a window summarizing what is done. The original invoice is marked as being open, a second invoice is created for the bank charge, and a couple of journal entries are posted.

Bounced Check Notice

The original payment is stamped as being a “bounced check”:

Bounced Check

I have a new invoice for the bank charge:

Bank Charge Invoice

The original invoice no longer has a payment applied:

Original Invoice

I also have two journal entries:

Journal Entry for invoice

Journal Entry for fee

Here is my updated Trial Balance:

Updated trial balance

That was all very simple, just click the one button (and save the new invoice that is created)!

There are a number of changes to the lists in my company file. Look at the Chart of Accounts. You can see a new account, Returned Check Charges, that QuickBooks added automatically. It doesn’t have an account number. There also is an account Bank Service Charges, but in this test I already had an account with that name so QuickBooks used that. In other tests, if I didn’t have an account with that name, QuickBooks would create it. It’s important to note these kinds of changes, as I always like to know what is going on in the chart of accounts.

Updated Chart of Accounts

In addition, QuickBooks will add an Other Charge item to the Item List, Bounced Check Charge.

Bounced Check Other Charge Item

Problems With this Feature

This is a new feature, and there are a few problems to be aware of.

If you look back at the journal entries you will note that by default, they were marked as billable. So if I create another invoice for this client, and ask the system to enter billable time and costs, you see these transactions in the Expenses tab. Not good!

Journal Entries are Billable

The workaround for that is to edit the journal entries before you create another invoice for the customer, but that is messy.

A bigger problem has to do with the Undeposited Funds account. Most people have deposits going to Undeposited Funds, a special account that QuickBooks creates to hold deposits. It is generally on by default if you create a new company file. If you receive a payment to Undeposited Funds then you get this warning.

Bounced Check Warning

I’m not sure WHY this restriction is here, but it is. If I use my own account instead of Undeposited Funds, it works. How do you get around this?

My friend Woody Adams of Radio Free QuickBooks pointed out that you can un-check the preference to use the Undeposited Funds account and create your own deposit account to manage this.

Undeposited Funds preference

Now you will have to select the account to make the deposit to. You may have to create an appropriate account.

Selecting Deposit To

Then, if you wish, you can turn the Undeposited Funds preference back on. You would only need to turn it off and on for bounced checks. Thanks for the tip, Woody!

I also ran into a problem with getting the program to properly use Undeposited Funds if I created a new company, turned the preference off before entering any transactions, did some receipts, then turned the preference on. It kept using the older account, not letting me use the Undeposited Funds account. However, if I closed the file and reopened it, this problem went away.

 

Here is another new feature that seems to have problems right out of the blocks, when first introduced. Does it seem that we are getting more of these kinds of problems lately? These particular problems aren’t fatal – you don’t have any file damage, and there are workarounds. Also, you can easily just avoid using this feature and use one of the other recommended methods for dealing with bounced checks. I’ll note also that the majority of the users won’t see this feature until (probably) 2013, as it isn’t available to anyone except ProAdvisors and people who use the “Plus” monthly subscription. Regular desktop users, any Enterprise users, don’t get the Plus features until the next product year.