receive payments, set credit does not work

[Angela (UK)]

Can anyone help?

I have amounts showing on the aging debtor listing, but the sums are not really owed. Their credits show also in a different age bracket.

They relate to bounced cheques that went on to become bad debts. To reflect the bounced chq, I entered a cheque, put payee as 'bounced chq', selected the A/R account and made sure I had enetred the Customer:job on the right side of the cheque. I entered the cheque number as 'BOUNCED'.

I used to create a journal to take out of A/R and into bad debt. I realise this is not the way to do it.

So, for the last bad debt, I created a credit memo for the customer, and then went into the receive payments window, hoping to be able to match the bounced cheque with the unused credit.

I can see the unused credit amount at the bottom of the receive payments window and the outstanding bounced chq in the middle section.

The system will not allow me to match these. I can put a tick on the left of the line referring to the bounced chq, but when I then click the set credits box, I keep getting a warning that says something like 'you can only discount invoices.'

I wasn't sure until browsing this site whether I should put an amount in the 'amount' field at the top of the screen. I can see that this should be left blank. However, I had tried various combinations of fields - and did actually hit upon the correct way to do it - according to info on this site.

Whatever I do, I can't get to the credits window to allow me to pick up the credit memo.

Is this a known bug in 2001 Pro?

By the way, when I do receive a payment from a customer for a bounced chq, the receive payments window works just fine, and the bounced chq has disappeared from the aging debtor list.

Does anyone know where I'm going wrong?

[crazysonoran]

You missed the boat, so to speak, when trying to handle a bounced check. First thing you need to do is undo what you did to try to correct the problem. Then create a bad check item with its income account listed as your checking account. Then create a credit memo that matches the initial invoice exactly but then add that bad check item as a negative so it zeroes out the credit memo. This takes the money out of the checking account and zeroes out the sale temporarily. Once you do that reinvoice the customer and add the charges you might charge the customer for bouncing the check. Now the customer will have a new invoice that they owe on and your bank balance will be where it needs to be, plus once they pay you again you'll have an invoice to apply the payment to.

Hope that helps.

Dave

[Angela (UK)]

Thanks for the reply, but I'm a little confused.

When a cheque bounces, I thought it needs to be entered as a cheque (thus registering in the current bank account), with an account of Accounts Receivable - indicating that we are expecting to receive the money back.

When I raised a credit memo, I had already raised an item - called it bad debt and assigned this to the 'bad debt' expense account.

As I can see the bounced chq in the middle section of the receive payments window, and the unused credit equalling the amount of the credit memo shows at the bottom of the page, it looks like these have been raised correctly(?)

Also, you suggest to raise an invoice for these customers - but I know these customers will not pay up - hence my decision to write them off as a bad debt (unrecoverable).

If I thought we were going to get the money back, I would just leave the bounced chqs in the A/R account. Most of the time, we do receive a payment from a customer for a bounced chq - and I have no problem in attaching the money received to the bounced chq via the payments received window. The money received is deposited to the bank account - and all works fine.This window only appears not to work when I'm trying to match a credit memo, in the circumstances where a customer will never pay up.

Sorry - I'm bound to have misunderstood your reply, so please forgive me!

[Angela (UK)]

Ok, got it now.

Thanks crazysonoran, it was the INVOICE bit that I wasn't getting.

Whilst the method I was using for creating a bounced cheque worked fine IF we ever got the payment for it - it didn't work if we had to match a credit memo (I assume due to the fact that a credit memo will only ever be able to be matched against a document type of INVOICE, not cheque).

I am altering my procedures to raise bounced cheques as invoices from the point they bounce.

[crazysonoran]

That system was very confusing to me when I first saw it but when I realized that the bad chq item actually took the money back out of the bank, then the invoice re-billed the customer it started to make sense. If you dont expect to get paid at all then take that invoice, go to the recieve payments screen, put in that customer and discount it using the bad debt account and that will take it off the books properly.

Dave

[hartford]

Hi Angela (UK)
This whole idea of raising invoices to deal with bounced cheques sounds pretty crazy to me, but if it fixes your problem (without creating another) then fine.
In accounting and not QB theory you treat the bounced cheque as a payment posting it to the customer a/c. This restores the balance but the balance becomes the bounced cheque not the original invoice. Again this may be correct as if you sue the customer you should sue on the bounced cheque & not the original invoice. However the problem with my way is that although the bounced cheque balance appears on the A/R Report it does not generate a statement. Isn't QB just great! Can anyone help on this or have another way.

[crazysonoran]

To help clarify, the credit memo takes the sale and reverses it temporarily, the bad check item that is on the credit memo that has it's income account listed as the checking account takes the money back out of the checking account. This leaves the customer not owing any money so the invoice has to be rebilled and that allows the bad check charges to be included so the customer can be billed for them.
I was skeptical about it right at frist but I tested it in a sample file and it does exactly what it is supposed to do, take the money out of the account and reopen the invoice to the customer becuase they now owe the money again.

This is all in the help and support system of 2002 and 2003, thats where I got it from actually.

Dave

[Angela (UK)]

Thanks Hartford & Dave

I think the software is deficient in this respect. I follow Hartford's theory, and I was originally trying to write off the bounced chq without raising it as an invoice, as I too thought this cannot be right.

However, if you raise a chq in the system to reflect the bounced chq (expense account of A/R), as Dave says, there is no way you can match it to a credit memo when you want to write it off as a bad debt.

So, from now on, we are raising all bounced cheques as invoices - then it is irrelevant as to whether we receive the funds back or whether we have to write it off as a bad debt, as each situation works equally well following Dave's advice.