Dealing with Overpayment

Hello liza-careandcomp

You can record a refund to your client using an expense if they want you to reimburse the accidental overpayment. Using an expense to record the refund reduces your bank's balance and offsets the customer's open credit caused by the overpayment. (Tip: entering the full amount of the payment received on the 'receive payment' screen will close the invoice and automatically creates an unapplied credit of the overpayment amount on the customers account). 

To record the refund for your customer:

1. Select + New > Expense (if you're in Business view, follow the steps to switch to Accountant view first.)
2. Select the customer you want to refund from the Payee ▼ dropdown.
3. From the Payment account ▼ dropdown, select the bank account where you deposited the overpayment to.
4. On the first line of the Category column, select Accounts Receivable.
5. Enter the overpayment amount in the Amount field.
6. Fill out the other fields as you see fit, then select Save and close.

To link the refund to the overpayment:

1. Select + New > Receive payment.
2. Select the same customer you used for the check or expense when recording the refund.
3. Fill out the other fields as you see fit.
4. Under the Outstanding Transaction section, select the checkbox for the expense you created when recording the refund.
Note: If you have automation to apply bill payments turned on, this step is done for you.
5. Make sure the payment is equal to the open balance, then select Save and close.

Sorry I should also have said that I don't want to refund the overpayment - I want it to stay on the Customer's account until another invoice is issued and then used against that invoice. 

Also we allocate our payments via the bank and "match" the payments.

Many Thanks

Hello Liza-careandcomp,  If you want to see it in the customer account you will need to record it as a deposit to debtors with the customer's name in the received from section. Then you can allocate it to the open invoice and the overpayment will remain as an open balance until you allocate it to another invoice.

Please could you give me the steps to do this, I will need to do from the book-keeping tab as this is how we allocate our payments from our bank?

Hi liza-careandcomp, if you don't have your bank connected you can instead enter the full amount received on the invoice to create an unapplied credit on the customers account (open the invoice and select receive payment > change the 'amount received' field to the full amount including the overpayment). You can then apply this to future invoices for the customer by ticking the unapplied payment under credits).

If you've already marked the invoice as paid for the amount due (not including the overpayment amount) you can instead record the credit by creating a bank deposit. To do this, select + New > Bank deposit and select the date and bank account that the payment was received to. After this, scroll to 'Add payment to this deposit' and select the customer under 'Received from', select Debtors as the category (you may instead have this as 'Accounts receivable') and enter the overpayment amount. After saving, you'll then see this reflected on the customers account where you can apply as payment to future transactions.

We do have the bank connected - so please can you send me the steps to do this with the bank connected.

Hello Liza-careandcomp,  If you want to see it in the customer account you will need to record it as a deposit to debtors with the customer's name in the received from section. Then you can allocate it to the open invoice and the overpayment will remain as an open balance until you allocate it to another invoice.

This is what I need the steps for :)

Thanks

Hi liza-careandcomp, these would be the steps to take when the bank is connected: from the for review banking page, click on the transaction to expand and edit. Under 'Transaction type' select Deposit, choose Debtors under 'Category' and the customer under 'Customer', then complete any other fields as you see fit and select Add. You can then select this as the payment on the open invoice and the overpayment amount will remain on the account to be applied in the future.

So is a customer payment has paid an existing invoice in full and there is additional money then I would match the invoice via the banking - do I need to do anything when it asks me to resolve the payment?

Then I would follow your steps below for the additional credit?

Thanks

Hi Liza-careandcomp, so you would just resolve the difference and if you put it to debtors no vat it will then sit on the customer/suppliers account as an unapplied payment to then either be used at a later date or be returned to the customer/supplier.

I have this situation too.  I have an unapplied deposit (overpayment) sitting in the customer account.  I have made the refund via a bank transfer but cannot seem to link up the refund to the deposit.  I have tried an expense to debtors, credit notes, everything!  I keep ending up with double the amount of overpayment sitting in the customer account.  Where am I going wrong?

Hello JayC, thanks for your comment. If you already have the overpayment sitting on the customer account, you do not need to a credit note as the credit is already there (the overpayment) which is why you then end up with a double payment when you do the credit. All you need to do is go to +new in the top left>receive the payment >select the customer>the overpayment and the expense to debtors should both show>tick them both>the amount received should total zero as they offset each other. Then save.

I have a similar situation. I have an invoice and a payment that is more than the invoice. I put in the total amount of payment a left the overpayment as a credit in QuickBooks Desktop Pro Plus 2023. The deposit states the amount is the original amount of the invoice paid NOT the check received payment amount. i.e. invoice was $3,200 payment was $3,500 and deposit should be $3,500. Credit left on customer account is $300. How do you get the deposit to read the $3,500?

Let me help you go over your sales transactions to correct the amounts involved, @fclark.

QuickBooks will automatically record the difference ($300) between the payment ($3,500) and invoice ($3,200) as credit. Once deposited, the $3,500 should appear as it now exists in your bank regardless of the overpayment. To clear the customer balance, you can apply it to future invoices since it will be recorded under the A/R account.

I'm adding some screenshots for reference:

To learn the options you can use with the overpayment, refer to this article: Give your customer a credit or refund in QuickBooks Desktop for Windows.

To learn what you can do with the payments, check out this guide: Void or refund customer payments in QuickBooks Desktop.

Feel free to comment below for any follow-up questions about customer payments and invoices. I'll always do my best to assist you. Stay safe.

All looks good except for one thing. On the home screen in Record deposits it shows (2). The $3200 and the 3500. I checked just the $3500, but it leaves the other. What do you do with that? I don't want a red deposit pending to show in Record deposits.

I appreciate your response and the additional information, fclark. I would like to join you in this conversation and offer my assistance in clearing out the Deposit window.

Based on your description, it sounds like there may be two separate transactions recorded for this customer - one for $3200 and one for $3500. This would explain why you still see the $3200 reflected as a pending deposit even after the $3500 transaction was deposited.

I recommend reviewing the transaction list in the Customer Center to verify if there are duplicate entries. Let me show you how:

1. Go to the Customer Center and Customers and Jobs tab.
2. Look for the name of the customer and click on it.
3. Review the list of transactions in the Transactions tab.
4. If you find a duplicate record, double-click on it to open the transaction.
5. Once opened, click the Delete button and select OK to confirm that you want to delete it. 

Make sure you are deleting the one that's not attached to the invoice so it will not open the transaction again. 

I also wanted to share these articles with you in case you need more information when managing customer payments in QuickBooks: 

• Resolve Common Issues When Applying A Payment Towards An Invoice
• Give Your Customer A Credit Or Refund In QuickBooks Desktop For Windows

Please let me know if you need any further assistance on cleaning this up, fclark. The Community is always here to help if any other questions come up.

Thanks - the first part made sense (I resolved the difference); but not sure how to "use it later".

After resolving the difference I'm puzzled, as I expected the overpayment amount to then appear in the Customers Transaction list, and reduce the Open Balance; but it does not.  Viewing the Customer page, we just don't see it there.

But if I generate a Statement, I CAN see "Deposit: [memo: overpayment]" -£20.00. (Confirming it was recorded with the correct customer account).  But it doesn't reduce the balance.

So how do find this payment, and then match/apply it e.g. to pay a future invoice, or match to a refund transaction in the bank feed transaction list?

(If we open an invoice (Edit invoice) we can't see any option apply this credit; the only likely option is "Receive payment"; but the payment has already been recorded.  We want to match/apply the overpayment to an the invoice.)

Thanks

I can fix your concern about overpayment in QuickBooks Online (QBO), Richard. 

Based on the information you’ve outlined in this thread, I can see why you’re unable to see the overpayment you’ve created, this is due to the account you used upon recording the difference. In resolving the difference in the deposit intended for the invoice, we should choose Debtors as the Category and select the customer's name under the Payee section.

Since you have already recorded the difference, we can go over to your Chart of Accounts where the difference has been posted and move this to the Debtors account. I’ll share the steps with you how:

1. Go to the Transactions menu, and select Chart of Accounts (COA).
2. Locate the account where you initially posted the difference.
3. Hit the Account history under the Action column.
4. Locate and tap the entry that has a Deposit type of transaction.
5. In the Account section, please select Debtors.
6. Then, click Save and close.

After that, the transaction should reduce your opening balance for this customer. In time you’ll want to create an invoice or apply this credit, you can normally create the transaction and if the option to automatically apply credits, this will automatically offset the balance. Otherwise, you can refer to this article to learn about manually applying credit to an invoice: Create and apply credit notes or delayed credits in QuickBooks Online.

If you have other concerns about managing customer payments, please don’t hesitate to post them here by adding a comment. The Community is 24/7 available to help. Take care!

Thanks RoseJillB for the quick and very clear reply.  Hopefully that'll be useful for anyone who has resolved the transaction to a different account, as well as useful for me to know.

In my case though, I already selected the Debtors account when resolving the transaction.

Following the steps suggested above, shows the transaction in the Debtors account, with the correct customer, all as expected.  Hence my puzzlement.

Hi Richard, thanks for getting back to us here. 

If you have the setting to automatically apply credits turned on, it may be that the credit created through the resolve difference has been auto-applied to an existing open invoice for the customer. You can manage this setting through the Gear > Account & settings > Advanced > Automation. 

I'd recommend reaching out to our support team on chat or by calling 0808 234 5337 (M-F, 8AM - 7PM, free from UK mobile & landlines). The agents available here will have access to set up a remote screenshare so that we can get a clearer picture of how the transactions are posting. :)