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Record a customer refund or supplier refund in QuickBooks Online

Learn how to refund a customer or supplier in QuickBooks Online.

If you need to provide a refund to a customer or supplier, don't worry. We’ll show you how to record a refund based on various scenarios. This ensures your books are up-to-date.

  1. Select + New and select Supplier credit.
  2. In the Supplier field, select the appropriate supplier.
  3. Enter the Payment date, Credit Amount, and Account (the account used here is typically the original expense account on the original bill).
  4. Select Save.

Note: If the supplier has been overpaid – you do not need the supplier credit as you will already have an unapplied credit that acts as your supplier credit.

  1. Select + New and select Bank deposit.
  2. In the Add funds to this deposit section, enter the following information:
    • In the Received From field select or enter the desired supplier.
    • In the Account field, select the Creditors account (Accounts payable).
    • In the Amount field, enter the amount of the refund.
    • In the Amounts are field, select NO VAT (not inclusive/exclusive).
    • Select Save.
  3. Next, go to + New and select Cheque.
  4. Add the payee and choose the Supplier Credit and the deposit (from the drawer that appears on the right-hand side) and add them both.
  5. Balance should be 0 as they will cancel each other out.
  6. Select Save and close.
  7. If you have Online Banking, go to the Banking page and match the record found.
  1. Select + New and select Credit note.
  2. In the Pay to the order field, select the appropriate customer.
  3. Enter the Credit Note Date, Credit Amount, and Account (the account used here is typically the product and service on the original invoice).
  4. Select Save.

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.

  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 Debtors account (Accounts receivable).
  4. In the Amount field, enter the amount of the refund.
  5. In the Amounts are field, select NO VAT (not inclusive/exclusive).
  6. Select Save.
  7. Next, go to + New and select Receive payment.
  8. Add the payee and choose the Credit note and the expense.
  9. Balance should be 0 as they will cancel each other out.
  10. Select Save and close.
  11. If you have Online Banking, go to the Banking page and match the record found.

Refund for goods or services that didn’t satisfy the customer


You can use refund receipts if a customer asks for a refund for an item or service.

Note: To avoid a double refund, make sure you didn't enter a credit note yet.

  1. Select + New.
  2. Select Refund receipt or Give refund.
  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 (or a sales receipt) to.
  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, tax, and other fields accordingly, then select Save and close.

You can record a refund to your customer using Cheque or Expense if:

  • They want to redeem their open credits (credit notes).
  • They made a prepayment for an order but cancelled it before receiving the goods or services.
  • They want you to reimburse an accidental overpayment.

Using Cheque or Expense to record the refund reduces your bank's balance and offsets the customer's open credit, overpayment or prepayment.

Step 1: Record the refund for your customer

  1. Select + New.
  2. Select Expense, or Cheque.
    Note: Both Expense and Cheque recognise and record expenses. When you use Cheque, the transaction adds to the list of cheques that you can print.
  3. Select the customer you want to refund from the Payee ▼ drop-down.
  4. From the Payment account ▼ drop-down, select the bank account where you deposited the overpayment to.
  5. In the first line of the Category column, select Debtors (Accounts receivable).
  6. Enter how much you want to refund in the Amount field.
  7. Fill out the other fields as you see fit, then select Save and close.
    Note: If your customer refund is reflected on your automated bank feed, you don’t need to record it manually. Simply use the Add function to add the refund as an expense and categorise it to the Debtors (Accounts receivable) account.

Step 2: Link the refund to the customer's credit or overpayment

  1. Select + New.
  2. Select Receive payment.
  3. Select the same customer you used for the cheque or expense when recording the refund.
  4. Fill out the other fields as you see fit.
  5. Under the Outstanding Transaction section, select the checkbox for the Expense or Cheque you created when recording the refund.
  6. In the Credits section, select the Credit or Overpayment you want to link with the refund in Step 5.
    Note: Customer credits and overpayments may exist in different forms (such as credit notes, deposits or unapplied payments), if they are categorised against a debtor’s type of account – usually the one called Debtors (Accounts receivable). If you cannot see a deposit you entered to reflect a customer’s overpayment among the options in the Credits section of the screen, find this deposit first and ensure it’s categorised against the Debtors (Accounts receivable) account.
  7. Make sure the payment is equal to the open balance, then select Save and close. You have successfully linked the customer refund to a credit (overpayment). Any linked credit note will be marked as closed, and a deposit will be marked as paid.

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