How to Record Customer Refunds in QuickBooks Online

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. 

In many cases, customers want money refunds when he/she is not satisfied with the product/service they brought 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.

Several ways to Record Customer Refunds in QuickBooks Online

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 refund check is going to be issued to a customer, 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 credit card or other payment methods, 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 you didn’t enter a credit memo yet. Do you know how to process credit card payments in QuickBooks Online, if you need to know to 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 Refund
  • Click on the Customer ▼ dropdown menu and then choose the bank where you want to get the refund.
  • Now pick the Refund From ▼ dropdown menu and then choose the bank where you deposited the payment for the invoice.
  • If the customer is not returning you any items so 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 Setup Return & Allowances when a customer didn’t return an item?

When your customer didn’t return an item you have to set up an account named Return and Allowances. 

  1. To begin, simply assign this account to the Category type of Income and a Detail type of Discount/Refunds given.
  2. After that, on the Product and Service list you have to set up a service.
  3. 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.

  1. 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 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 order and canceled it before receiving the goods/services at their location
  • If a customer wants you to refund an accidental overpayment.

By using Check or Expense to record the refunds reduces your bank balance as well as offsets the customer’s open credit, overpayment/prepayment.

Step 1: Record the Refund for your Customer

  • To start, click on the +New option
  • Now choose the 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
  • 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 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 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 behaviour 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 Automation section by scrolling down on the right
  • In the end, click on the Automatically Apply Credits option(now you have successfully changed its behaviour).

Entering in 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 which 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 for the 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).

Wrapping Up

We have successfully covered all the topics that are frequently asked by our QuickBooks Online users related to record 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 in record customer refunds in QuickBooks Online, 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 +1-855-441-4417 and fix all your QB queries under expert guidance.

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