Recording a “stop payment” in QuickBooks is one of the most important steps in maintaining and guaranteeing the accuracy of your financial records.
Stop payment option is executed when you have made a payment that needs to be cancelled because of the following reasons such as:
- Errors: The check was written for the wrong date, amount, person, or contains another error.
- Canceled contract: The payment is no longer needed because of a canceled contract.
- Insufficient funds: The payer thought there was enough money in the account to cover the payment, but there wasn’t.
- Fraud: The check was part of a scam or fraud scheme.
- Lost or stolen: The check was lost, stolen, or damaged.
- Dispute: There is a dispute between the depositor and the recipient of the check.
When you apply for a stop payment with the bank, is it better to:
- Wait until you reconcile the bank account and address the stop payment charge under bank charges at the bottom of the screen, or
- Create an invoice under the bank’s name (vendor) for the amount of the stop payment and then reconcile it against the bank statement, just as you would do with other transactions.
Importance of “Stop Payment” feature in QuickBooks
- Security and Control: It adds an additional layer of security to the account and provides control over payments. In case of incorrect payment, businesses can take immediate action if the payment needs to be halted.
- Prevent Unauthorized Payment: You get access to stop the payment on a check or any electrical payment mode in case you don’t want the payment to be processed.
- Avoid penalties: It helps businesses avoid the fees or penalties that might arise from incorrect or erroneous payments.
- Maintain Accuracy: This ensures that every small business’s financial records are recorded correctly and reflect the correct information.
- Managing cash flow: Businesses can manage cash flow by avoiding funds being debited or withdrawn from their bank accounts.
What do you do to stop payment in QuickBooks?
To learn the best way to stop payment in QuickBooks, you can either delete the paycheck, edit the paycheck, or void it.
Editing a paycheck: This allows you to update your paycheck information directly for the payroll. You can easily edit the paycheck if you haven’t sent your payroll to us yet.
Deleting a paycheck: This action removes the paycheck from your payroll. You can easily delete the paycheck if you haven’t sent your payroll to us yet.
Voiding a paycheck: This action changes your paycheck dollar amount to zero. You may need to make adjustments to balance your books. This doesn’t stop a direct deposit from processing and doesn’t return funds to you. You can easily void the paycheck if you haven’t sent your payroll to us yet.
How to Record a Stop Payment in QuickBooks Desktop?
To record a stop payment in QuickBooks Desktop, void the contractor’s payment by navigating to Vendor Center, selecting the check, and voiding it. Then, send payroll data and review the transaction.
Following the step-by-step information below:
Part 1: Nullified contractor payments
To void a contractor payment in QuickBooks Desktop, go to the Vendor Center, select the vendor, locate the check, and choose “Void.” The check amount will update to $0.00.
Step 1: Navigate to the vendor’s details
- Click on the Vendor menu, then click on Vendor Center.
- From the Vendors tab, choose the vendor name.
Step 2: Locate the check to void payment
- From the Transactions tab, double-click the check you want to void.
- Right-click the check image and choose Void.
- After you have voided the paycheck, a notation is included in the memo field, and the net amount of the check is 0.00.
Part 2: Do the transaction to stop payment
To process a stop payment in QuickBooks Desktop, select the voided payments under the Employees menu, click “Send All,” review the transaction details, enter your PIN, and click OK.
Step 1: Select the voided payments
- Choose the Employees menu, then select Send Payroll Data.
- Click on Send All.
Step 2: Review the transaction
- Check the details thoroughly.
- Enter your PIN, then select OK.
How to Record a Stop Payment in QuickBooks Online?
To record a stop payment in QuickBooks Online, create a journal entry with debits and credits, add a memo, and save. For unprocessed payments, navigate to Vendors, select the payment, and choose to delete or void it.
Steps to recording a stop payment or processed direct deposit payments:
- Select + New.
- Select Journal entry.
Step 2: Enter the journal entry details
- First, select an account from the “Account” field on the first line. Depending on whether you need to debit or credit the account, enter the amount in the correct column.
- On the next line, select the other account you are moving money to or from. Depending on whether you entered a debit or credit on the first line, enter the same amount in the opposite column.
- Check the amounts. You should have the same amount in the “Credit” column on one line and the “Debit” column on the other. This ensures that the accounts are in balance.
Step 3: Mention the details in the memo section
- Enter information in the memo section so you know why you made the journal entry.
Step 4: Save the Journal entry
- Select Save and new or Save and close.
Steps to stop recording stop payment or unprocessed direct deposit payments or non-direct deposit payments
Step 1: Navigate to the Vendor
- Go to Expenses.
- Then click on Vendors.
Step 2: Confirm the Void/ Delete action
- Select your contractor.
- Look for the payment you want to delete or void, then select View/Edit.
Step 3: Verify the transaction
- Select Delete or Void.
- Select Yes to confirm changes.
Conclusion
A stop payment that is properly documented can help protect against future problems with creditors and vendors by demonstrating the purpose and approval of the stopped transaction. Ensuring the accuracy of your financial records and their reflection of your company’s real-time transactions is ensured by recording a stop payment in QuickBooks.
You maintain an accurate and transparent accounting system, which is necessary for efficient financial oversight and decision-making, by carefully handling stop payments in QuickBooks.