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Record a customer refund in QuickBooks Online

by Intuit133 Updated 2 months 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 ensures your books are up to date.

Step 1: Enter a credit note

  1. Select + New and select Credit note.
  2. In the Customer field, select the appropriate customer.
  3. Enter the Credit Note Date, Amount, VAT, and Product/Service (This is the category, product, or service you’re getting a credit for).
    Note: If you choose a stock item, QuickBooks will put it back into stock. If the item is defective or if you don’t want it added back to stock, you can make an stock 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 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 Debtors account (Accounts receivable).
  5. In the Amount field, enter the amount of the refund.
  6. In the VAT field, select No VAT (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 select Bank transactions (Take me there) and match the record found.

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 haven't entered a credit 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 (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, Qty, Rate, Amount, VAT, 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.
  3. Select the customer you want to refund from the Payee ▼ dropdown.
  4. From the Payment account ▼ dropdown, select the bank account where you deposited the overpayment to.
    Note: If you are selecting Cheque, then you will have to select Bank Account▼ dropdown.
  5. On the first line of the Category column, select Debtors (Accounts receivable).
  6. In the VAT field, select No VAT.
  7. Enter how much you want to refund in the Amount field.
  8. Fill out the other fields as you see fit, then select Save and close.

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. In the Outstanding Transactions section, select the checkbox for the Expense or Cheque you created when recording the refund.
    Note: If you have automation to apply bill payments turned on, this step is done for you.
  6. Make sure the payment is equal to the open balance, then select Save and close.
  7. If you have Online Banking, select Transactions, then go to Bank transactions (Take me there) and match the record found.

We're here to help
If you have questions about providing refunds or credit notes, or need help refunding a customer or supplier, let us know. Sign in to QuickBooks and start a discussion with a qualified QuickBooks Online expert in the community.

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