Dishonoured / stale / Void Cheques from customer Treatment (invoice Level)

A cheque you received earlier and captured in the system for sales can be dishonoured.

To properly keep records, don’t reverse the transaction by deleting the cheque. You should rather enter a reversing transaction and file the bounced cheque.

To properly record a bounced cheque follow this;

  1. Locate the Sales invoice for which the returned cheque was issued.

  1. Click on the amount in blue (Balance Due) . It will show the history of the invoice which will show the entry of the bounced cheque.

  2. You will have to enter a receipt transaction on the invoice but with a negative amount. So click on receive money button and enter the reversal information.

Make sure you get the bank account right else your Bank reconciliation will be impossible.

The invoice # will load by default.

Balance receivable on invoice is back to unpaid.

  1. Check the balance on the invoice after the reversal.

My Tip: Issue an invoice always to a customer who is going to pay with a cheque even if the customer will make immediate payment with the cheque and not a straight forward receipt which is not based on a sales invoice. A reversal of the cheque receipt will leave the balance in account receivable in the event of dishonoured/stopped/void/stale cheques.

I intentionally made all the dates of the entries different to arrange the transactions in a way to make it easy to see the effect. Ideally, enter the reversal with the date of issuing the invoice so that all late payment fees will not be affected. I’m yet to see the effect of this on late payment fees though.

You can use the same work flow for Purchases invoice you pay with a cheque.

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nifty. except that if auditor see this, might confuse a bit. :smile: . I’m looking at ‘cancellation’ with ‘batch select’ feature where the transaction will be labelled as cancelled and the transaction automatic reverse by Manager for zeroing it back.

@lubos can this be done? to discourage the users to delete the error in transactions?

My view is that uncleared bank transaction should have an option to be “cancelled”. Deleting uncleared bank transaction just because it was never presented on bank statement will alter balance sheet which is not desirable.

So yeah, this will be added.

Such a feature would be a plus.

may i add something, these days bank charges you some amount if the cheque is not cleared due to various reasons like signature mismatch of low balance in account etc. which we have to add to customer invoice so please if you can take care of that too.

This must be entered as a completely separate bank transaction. You are paying a fee to the bank. While the fee may have been triggered by a bad cheque, it has nothing to do with the transaction where the cheque was received. Post this new transaction to an expense account, such as Bank fees.

Yes the payment of the fee is a separate bank transaction, but the recovery of the fee from the customer could be generated as part of the “cancel” process. If you select the option to cancel (as noted by Lubos) then a tick box could appear - Fees to be charged.

I don’t get it, the supplier suffers a fee if the customer’s cheque gets bounced?
I thought it the customer who’s bank account will suffer that charge?

the payee and payer both are charged a penalty in case of a cheque bounce.
comparatively the payer is penalized more than the payee.
Cheque issuer (drawer) will be charged by the issuing bank for outward return cheque & payee (in whose favour cheque has been drawn) will be charged by the presenting bank for inward return cheque.

I see, in my country i know of the customer facing charges and not he supplier (Payee) who is just demanding for payment and is not at fault that the customer (Payer) is not having enough balance.

First, when I wrote that the transaction must be separate, I was responding to @himayun19’s question about what to do with such fees currently. While there may be a cancellation feature in the future, there isn’t one now.

This is not a universal practice. Fee policies for bounced cheques can vary from bank to bank. Additionally, different businesses handle bounced cheques in different fashions. Some may contact the customer who wrote the bad cheque and arrange to resubmit. Others may demand a different form of payment. Some may issue another sales invoice for fee recovery. Others may modify the original invoice, similar to what would happen in Manager with late fees.

Any future cancellation feature must recognize these facts and not impose a particular procedure on a business.

A cancellation feature on bank transactions, whether inbound or outbound, seems useful because it preserves records of financial transactions, even if only for the sake of continuity. Automatic handling of bank charges seems less useful because whatever procedure might be built in could contradict either the bank’s process or a business’ method for handling such charges.

@lubos this idea though not perfect should be under ideas to remind you to add a cheque cancelling feature since cheques will be around for a little longer. Cheques are still the ultimate payment method in my country.

Yet in other countries, by the end of 2020, cheques will no longer be available as a payment method.

Yeah @Brucanna, but I believe insufficient funds, wrong account number etc will always be around to make some payment transactions unsuccessful and therefore the need to flag those payment in the system as unsuccessful or void. In order words it not really a matter about cheques alone, it actually about Voiding Transactions (particularly payment and Receipt).

I should have put it that way.

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In a non-cheque environment (electronic banking) insufficient funds shouldn’t exist. You can’t make a electronic payment without there being sufficient funds available.

If the wrong account number is an invalid account (doesn’t exist), then the paying bank should refund the account (albeit a few days later) as they couldn’t deliver the payment to a valid account,

If the wrong account number is a valid account number then you need to request a refund from the owner of that account.

Therefore, in the absence of a negotiable document (cheque), pending status shouldn’t exist as you have direct not deferred transactions.

This doesn’t distract from the Topic’s case that cancelled cheques should be entered as a separate transaction and not just deleted as though it never existed.

Whatever the case is, a feature to void a Payment/Receipt transaction so that it doesn’t affect its related bank account’s balance whiles keeping all its records intact will be welcomed.