How to handle a bounced check in ESC

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It is an unfortunate fact of life that at some point you will have to deal with a customer that writes you a bad check. When this happens you may be tempted to recall the invoice and simply delete the payment. This rarely works because the payment has already been deposited and the month the payment was made may already be closed. Fortunately, there is an easier way to handle this situation.

The solution is simply to create a correcting invoice that will remove the payment from your bank account and apply a penalty fee to the customer at the same time. Before you can do this, a little setup is in order.

Setup:

  1. Go to Sales → Enter Billing Codes in ESC and create a new Billing Code called NSF. 
  2. Set the Description to Bounced Check Amount, the Type to Other, the Amount to 0.00, and mark the billing code as Non Taxable. 
  3. In the Income Account field, choose your bank account (for example, Checking). This billing code will be used to enter the amount of the original invoice.
  4. Next, create a billing code to track any fees you charge the customer due to a bounced check. While still in the Enter Billing Codes screen, create a new code called NSFFEE.
  5. Set the description as NSF Fee, the Type to Other and the Account to a miscellaneous income account. This billing code ought to be marked as Non Taxable as well.


Now, when a customer bounces a check all you have to do is create a new invoice for the customer. This invoice will only have two line items on it. The first will be the NSF billing code in the full amount of the original invoice. The second will be for the fee you want to charge the customer due to the inconvenience and bank fees associated with the bounced check.

For example: The original invoice is for $295.49, including tax. If the customer’s check bounces you will create a new invoice with the NSF billing code set to $295.49 and the NSFFEE billing code set to $25.00 (or whatever fee you decide to charge).

Additional Notes:

If desired, you can also create a separate Department (Company → Enter Departments) for these NSF invoices to set them apart from your normal sales.

Providing you are not using all 10 characters for your invoice counter, you may want to set the invoice number of the NSF invoice to the letters NSF (or just N) followed by the original invoice number (NSF10256). This provides a reference to the original invoice and also allow these specific invoices to standout on reports.

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