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Handle customer refunds in QuickBooks Online

SOLVED•by QuickBooks•320•Updated March 01, 2024

If you need to return your customer's money, don't worry. Here's how to record a refund based on various scenarios. This will make sure your books are up-to-date.

Before you start

If you're a Simple Start user and you have received a refund for an expense you've paid, you can simply categorise the transaction to the same account (as used with the original expense). This will offset the previous expense that was paid with the refund you've received.

In case you need it, here are some other resources that might help you:

  1. Some customers prefer getting a credit to reduce the cost on their next purchase and we cover how to do this in handling adjustment notes or delayed credits in QuickBooks Online.
  2. If your customer has simply paid too much, find out about the 3 ways to handle a customer overpayment in QuickBooks Online.

If you still think a refund is the right way to go, let's get into it!

Recording customer refunds

Step 1: Enter a adjustment note

  1. Select + New and select Adjustment note.
  2. In the Customer field, select the appropriate customer.
  3. Enter the Adjustment Note Date, Amount, GST, and Product/Service (This is the category, product, or service you’re getting a credit for).
    Note: If you choose an inventory item, QuickBooks will put it back into inventory. If the item is defective or if you don’t want it added back to inventory, you can make an inventory adjustment.
  4. Select Save and close.

Note: If the customer has overpaid, you do not need the adjustment note as you will already have an unapplied credit that acts as your adjustment note.

Step 2: Make the refund

  1. Select + New and select Expense.
  2. In the Payee field, select or enter the desired customer.
  3. In the Payment account field, select the bank the money is being refunded from.
  4. In the Category field, select the Accounts Receivable.
  5. In the Amount field, enter the amount of the refund.
  6. In the GST field, select the appropriate GST (not inclusive/exclusive of tax).
  7. Select Save.
  8. Next, select + New and select Receive payment.
  9. Add the Customer and select the Payment method and Deposit to.
  10. Balance should be 0 as they will cancel each other out.
  11. Select Save and close.
  12. If you have Online Banking, go to Transactions and match the record found on the Bank transactions (Take me there) page.

You can use refund receipts if a customer asks for a refund for an item or service. If they used a credit card, learn how to refund a credit card payment.

Note: To avoid a double refund, make sure you haven't entered a adjustment note yet.

  1. Select + New.
  2. Select Refund receipt.
  3. Select the Customer ▼ dropdown, then select the customer you want to refund.
  4. Select the Refund From ▼ dropdown, then select the bank you deposited the payment for the invoice.
  5. Add all products or services the customer returned in the Product/Service column.
  6. Make sure to fill the Service Date, Quantity, Rate, Amount, GST, and other fields accordingly, then select Save and close.

Credit cards refunds have a few requirements:

  • Credit card refunds can only go back to the original card used for the purchase. You may need to contact your customer to get this info.
  • You can refund up to the amount of the original sale, but not more.
  • You can only issue credit card refunds within 90 days of the sale.
  1. Select + New.
  2. Select Refund receipt.
  3. Select the customer you want to refund from the Customer ▼ dropdown.
  4. Enter the details in the fields using the same info from the original sale. To credit back their credit card, in Payment method, select Credit Card. To credit back their bank account, in Payment method, select Direct Debit.
  5. In Refund From, select the account you wish to refund the customer from.
  6. Select Save and close.

You can now send or print the refund receipt by selecting Print or Preview.

Here's how to refund an invoice your customer already paid for.

  1. Select + New.
  2. Select Refund receipt.
  3. Select the customer you want to refund from the Customer ▼ dropdown.
  4. Enter the details in the fields using the info from the original sale.
  5. Select which payment method and account you wish to refund the customer from.
  6. Select Save and close.

You can now send or print the refund receipt.

  1. Select + New.
  2. Select Refund receipt.
  3. Select the customer you want to refund from the Customer ▼ dropdown.
  4. Enter the details in the fields using the info from the original sale. For partial refund, only add the items or amount you want to refund.
  5. Select Save and close.

You can now send or print the refund receipt.

We're here to help

If you need additional help or have questions, or you require assistance at any point in this process, our Customer Success team is happy to help.

Sign in to QuickBooks and start a discussion in our QuickBooks Community or join one of our Facebook Groups to connect with other like-minded QuickBooks customers. 

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