Sometimes you have to return the money you get from your customer and then you need to record customer refunds in QuickBooks Online. It generally happens and you don’t need to worry about it because here in this blog we will discuss the steps taken to record customer refunds in QuickBooks Online based on various scenarios. You must ensure that your books are up-to-date. Here we have provided several ways to record customers’ refunds in QuickBooks Online. Still, having an issue contact us : +1-844-405-0904
In many cases, customers want money refunds when he/she is not satisfied with the product/service they bought from you. If a customer refunds merchandise to you, then you need to issue a credit memo. Alternatively in case of money refunds due to received damaged product or the wrong product and the customer is not ready to order that product again then you have to issue a refund receipt to satisfy the customer and to build understanding.
Table of Contents
Steps to Record Customer Refunds in QuickBooks Online
Step 1: Record the Refund for your Customer
- To start, click on the +New option
- Now choose Expense, Add Expense, or Check. If you are in a business view then simply go through the steps to switch to Accountant first view and then move back to follow these steps
- Choose the customer you are willing to refund from the Payee ▼ drop-down menu
- Choose the bank account where you deposited the overpayment inside the Payment Account ▼ drop-down.
- Choose an Account Receivable on the first line of the Category column
- Inside the Amount field, you have to enter how much you want to refund
- Now fill out the other fields as you can see fit
- In the end, click on the Save and Close option to keep the changes
Step 2: Link the Refund to the Customer’s Credit or Overpayment
- To begin, click on the +New option
- Now choose the Receive Payment or Receive Invoice payment
- Pick the same customer you are used for the check/expense
- Now fill out the other fields as you can see fit
- You have to choose the checkbox for the Expense or the Check you created under the Outstanding Transaction section
- Check whether the payment is equivalent to the open balance
- In the end, simply choose the Save and Close option to keep the changes you made
How to Refund for Goods/Services that didn’t satisfy the Customer
As we mentioned above, if you ask for refunds rather than reducing an outstanding or future balance, simply issue a refund receipt for an item or service. A vendor refund check is going to be issued to a customer, which will deduct the refund amount from the bank account, and also decrease the income account if the customer didn’t return the item.
If he/she pays through a credit card or other payment method, you can pay back to that payment method. If you don’t know how to add or edit accepted credit card types in QuickBooks then refer to the blog.
Note: To avoid a double refund, you have to check out if you haven’t entered a credit memo yet. Do you know how to process credit card payments in QuickBooks Online? If you need to know, check out now.
Filling in the Refund receipt window is much the same as filling in the invoice window. To see the refund receipt window go through the steps listed down:
- To start, click on the +New option
- Choose the Refund receipt or Give a Refund
- Click on the Customer ▼ dropdown menu and then choose the bank where you want to get the refund.
- Now pick the Refund From ▼ the dropdown menu and then choose the bank where you deposited the payment for the invoice.
- If the customer is not returning any items you have to choose the Return & Allowances service. If a customer is ready to return the item received then under the Product or Service column, you have to add all the products or services returned by the customer(now there is no need to choose Return & Allowances service).
How to set up returns and allowances when a customer doesn’t return an item?
When your customer didn’t return an item you have to set up an account named Return and Allowances.
- To begin, simply assign this account to the Category type of Income and a Detail type of Discount/Refund given.
- After that, on the Product and Service list, you have to set up a service.
- Now provide a name to the Product and Service i.e. something like customer refunds or Return & Allowances. (Note: Keep in mind that do not choose the Is Taxable for this service.)
- Now service is allotted to the Return & Allowances account and check out that you have not mentioned any price or rate in it.
- Ensure that you have filled the quantity, rate, amount, tax, and other fields appropriately.
- In the end, click on the Save and Close option to save the changes you made. (Note: You can scroll down at the bottom of the refund receipt transaction window and put the same details you will get at the bottom of an invoice.)
How to Refund a Customer’s Overpayment or Credit
In this, you are eligible to record a refund to your customer with the help of a Check or Expense if it follows the key fields listed below:
- If the customer wants to redeem their open credits
- If the customer made a prepayment for an order and canceled it before receiving the goods/services at their location
- If a customer wants you to refund an accidental overpayment.
Using a Check or Expense to record the refunds reduces your bank balance as well as offsets the customer’s open credit, overpayment/prepayment.
How to Record a Credit Memo
You have to record a credit memo when customers return the products that are already purchased and if both you and your customer agree that the customer’s outstanding and future balance will be reduced, at that point you have to create a credit memo in QB Online.
Note: It is by default that the credit memos apply to outstanding as well as future invoices. If you are willing to modify its behavior then you have to follow the simple steps:
- Simply open the Accounts and Settings dialogue box(Gear Menu>> Account and Settings)
- Now click on the Advanced tab on the left
- Move to the Automation section by scrolling down on the right
- In the end, click on the Automatically Apply Credits option(now you have successfully changed its behavior).
Entering the Credit Memo transaction is much the same as entering the invoice window to display the Credit Memo window. To open the Credit Memo Window go through the steps listed down:
- To begin, click on the Create Menu button
- Then select Credit Memo or from the Sales Transaction page
- Now click on the New Transaction button and then pick the Credit Memo
- Choose the customer for whom you are applying a credit memo inside the Product/Service
- You have to fill in the bottom of the Credit Memo window with relevant information
- Now save the transaction(as same as the invoice transaction window).
Note: You are eligible to enter a credit memo for a customer even if the customer doesn’t have any outstanding invoices yet, But remember whenever you enter the next invoice invoice, QBO automatically applies the credit memo to the invoice. Whereas, When you enter a credit memo for a customer having outstanding invoices, QBO automatically applies the credit memo to the outstanding invoice. If you view the sales Transaction List for the particular invoice you have to notice that the Status is Partial(specifying that the invoice is partially paid).
Frequently Asked Questions (FAQs)
Here we have mentioned some frequently asked questions related to recording customer refunds. Read them and find the solution to your problem.
How to refund a customer if the invoice has been paid?
If you need to return your customer’s money, you can do it with the following process. Here we mentioned how you can record the customer refund if the invoice has been paid.
1. Go to +New and click Credit memo.
2. Go to the Customer field, and choose the right customer.
3. Enter the Credit Memo Date, Amount, Tax, and Product/Service.
4. Click Save and close.
How to record a return in QuickBooks?
If the customer returns the goods, you need to record them in your books. Here’s how you can record a return in QuickBooks.
1. Go to Sales Orders and click Orders.
2. Find the sales order that you want to record a return of.
3. Choose Return.
4. Add the return info. Enter the item quantity to return.
5. Click Save.
How to refund a deposit and close an invoice?
If a customer gave you a deposit but later asks for a refund, you can reverse the deposit by refunding it and applying for credit. Here are the steps on how you can fix it if you are a QuickBooks Online user.
1. Create a credit memo.
2. Create a Check to refund the deposit.
3. Record a Payment.
How to create a vendor credit in QuickBooks Online?
For creating vendor credit:
1. Choose + New then click on vendor credit.
2. Now select the vendor from the vendor drop-down.
3. Then next you need to categorize the purchase and item details.
4. Finally, click on Save and Close.
Wrapping Up
We have successfully covered all the topics that are frequently asked by our QuickBooks Online users related to recording customer refunds in QuickBooks Online. But still, we are unable to fix it through this blog, don’t worry, we have Intuit Certified ProAdvisors, they not only help you record customer refunds in QuickBooks Online but also analyze your business and provide the right software that helps you to achieve your business goals.
So what are looking for or what are waiting for, call us immediately at our 24/7 technical error support helpline number +1-844-405-0904 and fix all your QB queries under expert guidance.