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Refund your customer for a paid invoice in QuickBooks Online

by Intuit•34• Updated about 22 hours ago

You can refund a customer who has already paid an invoice with a adjustment note. Then, you create an expense to issue the refund, and link the two transactions. Use this method for a refund involving a lost package or the Accounts Receivable account.

If you want to refund individual items or services, create a refund receipt instead.

What you’ll need

The original paid transaction (invoice).
The customer's preferred payment method.
The bank account you are refunding from.

Create a adjustment note

First, create a adjustment note to record the credit on the customer's account.

Select + New or + Create.
Select Adjustment note.
From the Customer ▼ dropdown, select the appropriate customer.
Enter the Adjustment Note Date, Product/Service, Amount, and GST.
Note: If you are refunding an inventory item, QuickBooks adds it back to your inventory. If the item is defective or you don't want to add it back, you will need to make an inventory adjustment.
Select Save and close.

Create the refund expense

Next, create an expense to record the money you are refunding to the customer.

Select + New or + Create.
Select Expense.
From the Payee ▼ dropdown, select the customer you are refunding.
From the Payment account ▼ dropdown, select the bank account the money is being refunded from.
In the Category column, select the Accounts Receivable.
Note: If this is your first time adding a payment to accounts receivable, you may have to select + Add new and add Accounts Receivable if you do not see it in the dropdown.
In the Amount field, enter the total amount of the refund.
In the GST field you'll need to select Out of Scope.
Select Save.

Link the refund to the adjustment note

Finally, link the adjustment note and the expense to show the credit has been refunded.

Select + New or + Create.
Select Receive payment.
From the Customer ▼ dropdown, select the same customer.
Fill in the Payment method and Deposit To fields.
In the Outstanding Transactions section, tick the box for the Expense you created if it is not already selected.
In the Credits section, tick the box for the Adjustment Note you created if it is not already selected.
Make sure the balance is AUD0, as the adjustment note and expense will cancel each other out.
Select Save and close.

Results

After linking the transactions, your customer's account will show the adjustment note as paid, and the refund expense will be recorded. Your accounts receivable and bank account balances will be correct.

Next step

If you use online banking, go to Bank transactions to find and match the refund record when it appears in your bank feed.