Guides

Pay a refund

Sometimes, a business owes money to a customer and must pay a refund. Two basic situations may exist, requiring slightly different procedures:

  • A refund is being paid from a cash sale or without reference to the customer’s Accounts receivable balance.
  • A customer defined under the Customers tab has paid in advance, paid more than was owed, or has been issued a credit note, so a credit is being reported as a negative balance (or entry) in Accounts receivable.

Refunds from cash sales

In the Receipts & Payments tab, click New Payment:

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A payment entry screen will appear. Complete the form as you would for any other payment. In particular, complete a line item for the refund:

  • If an inventory or non-inventory item was involved in the original purchase, choose it in the Item field. Most of the remaining fields will fill automatically, but may be edited.
  • Account should be the same one to which the original purchase was posted. Because this is a payment, Manager will deduct the appropriate amount from an income account, add to Inventory on hand, and reduce Tax payable.
  • Description describes the return/refund.
  • Qty is the number of units being refunded. If an inventory item is not actually being returned, but only adjusted in price, enter zero or leave blank.
  • Unit price is the amount being refunded per unit of return. If only a partial refund is being made, enter the actual amount being refunded.
  • Choose the same Tax code used for the original transaction.
  • Select a Tracking Code if appropriate.

Click Create when the form is complete. Remember to pay the customer.

Refunds of credit balances

Customer credit balances will be automatically applied to the customer’s next invoice:

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But if the next invoice is unlikely to be issued soon or the customer has requested the credit be refunded, make a payment to reduce the credit balance. Most procedures are identical to refunds from cash sales as described above. However, for Account, select Accounts receivable, then select the Customer. If the refund is associated with a specific invoice, select it in the Invoice (optional) field. Otherwise, leave that field blank:

Click Create to save the transaction.

Caution
Refunding a credit balance only reduces the customer’s Accounts receivable balance. It does not adjust inventory or tax accounts. To do that, you must issue a credit note first.

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