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Record a customer refund in QuickBooks Online

by Intuit•3• Updated 5 days ago

Learn how to refund a customer in QuickBooks Online.

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.

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You can easily issue credit to your customers in QuickBooks Online. You might want to do this because you need to reduce a customer's invoice for some reason. Or you might want to give a customer credit because they are a good customer. Note that the difference between credit and a refund is a refund happens when you need to send money back to a customer. A credit is when you want to reduce what they owe you - either now or in the future. To give customers credit, you’ll create a credit note. Let’s go over how to create a credit note, send it to a customer, and then apply that credit to an invoice. To start, select New and Credit note (beat) or Give credit depending on your view. Select the customer you want to give credit to. Then select the products and services you want to give them credit for. Then the amount of the credit you want to give them. You can also select + Add new and create a credit item that doesn't have a specific price. Any time you add it to a credit note, you can fill in the amount you want to credit your customer's account. If you want to send a copy of the credit to your customer select save and send. Otherwise, you can select another save option so QuickBooks records the credit. We’ll select save and send for this option. You see the PDF version of the credit note that your customer will receive here. If everything looks good select save and close and your credit note is on its way. Now let’s go over how to apply a credit note to an invoice. If your customer already has an open invoice with you then this happens automatically. To see this go to your customer list. Find your customer and the open invoice. Select it and you can see QuickBooks has applied the credit note to the open invoice. What happened is QuickBooks automatically created this Payment transaction here to apply the credit note to the oldest open invoice. However, if your customer has multiple open invoices and you want to apply this credit to a different one, just select the payment. Then select the invoice you want to apply it to and enter the amount. Make sure this matches the amount of the credit note. Once everything looks good. Save...and then confirm. If your customer doesn’t have an open invoice then the credit will automatically be applied to their next invoice. Let’s take a look. Just create a credit note for your customer. Then when you create a new invoice for your customer (beat) you will see that QuickBooks has applied the credit to your new invoice. That’s it. Now you can create credit notes for your own customers.

Step 1: Enter a credit note

  1. Select + New or + Create. and select Credit note.
  2. In the Customer field, select the appropriate customer.
  3. Enter the Credit 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 credit note as you will already have an unapplied credit that acts as your credit note.

Step 2: Make the refund

  1. Select + New or + Create. 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, Follow this link to complete the steps in product Open this link in a new window and match the record found on the Bank transactions 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 credit note yet.

  1. Select + New or + Create.
  2. Select Refund receipt.
  3. Select the Customer â–Ľ dropdown, then select the customer you want to refund.
  4. Select the Refund From â–Ľ 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.
  • Your customer wants to redeem their open credits.
  • Your customer made a prepayment for an order, but they cancelled it before they received the item or service.
  • Your customer wants to be reimbursed for an accidental overpayment.

Record a refund to your customer with the Check or Expense option. This reduces your bank balance, and it offsets your customer's open credit, prepayment, or overpayment.