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Credit memo v refund

Hi.

 

A client paid an invoice for services, and later determined they did not want the services. They agreed that I could pay the monies back over six months.

 

I created a credit memo for the client, and have been paying the client for a few months through an electronic check from my bank. When I go to look at the client record in QBO, it shows an overall balance that appears correct (which is to say, I see a negative balance in the "open" field.) But, it also shows that there are past due amounts (totaling 3 of the 5 payments made so far.) And, when I open up the credit memo itself, I see the "Amount received" as the equivalent of 2 payments, and still see a total credit; that total credit matches the value of the 3 payments I've made (what is showing as past due on the client) plus the one remaining payment to be made.

 

Obviously, I am doing something really wrong here. With research, it appears that perhaps I should have created a refund for the client, rather than a credit memo. How can I resolve this?

 

Do I

(a) void/delete the credit memo, undo all of the bank transactions that have been recorded, then create a refund? can I directly apply the bank transactions to the refund?  if I refund the entire amount in one refund, can I apply payments to it over time? or, do I need to create a refund each month for the appropriate amount?

 

(b) need to do something else?

 

Thanks in advance for any assistance with this.

 

jen

B. 

1 Comment
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QuickBooks Team

Credit memo v refund

Hello, Jen. 

 

I hope you're doing well these days. I have a couple of ideas that can help you handle the credit memos for your client refund. 

 

Voiding or deleting the credit memo can be an option. Then, you would want to create Refund receipts (click the + New button, then select Refund receipt) for all the monies you paid back to the client. 

 

However, I have another option for you without deleting those credit memos. Generally, you would want to use a check, then associate the Accounts Receivable account. Then, link it with each credit memo. Here's how: 

 

Creating a check: 

 

  1. Click the + New button, then select Check
  2. Select the client under Payee.
  3. Set the payment date to when you paid the money back. 
  4. Under Category, select the Accounts Receivable account.
  5. Add the amount, then enter other important information.
  6. Once done, click Save and close.

 

clientref1.PNG

 

Do this for all the credit memos you created. After making the checks, you'll want to link both transactions to close out the memo:

 

  1. Open the + New button again. 
  2. Select Receive payment.
  3. Choose the client again. 
  4. Under the Outstanding Transaction section, select the checkbox for the check you created.
  5. Make sure the payment is equal to the open balance, then enter other important details. 
  6. Once done, click Save and close.

 

clientref2.PNG

 

You can do this for an entire amount (one check and one payment). However, you won't be able to match your bank transactions with each check payment. This method doesn't quite reflect what happened in real life. You gradually refunded the amount as oppose to a single transaction electronic check transaction. Generally, you can only match one QuickBooks record with one downloaded transaction (or one bank transaction to multiple QuickBooks records through split). 

 

Finally, you'll want to go to the Banking page, then match the refund transactions with the checks. Here's an example: 

 

clientref3.PNG

 

This is what the client's profile would look like after doing the steps: 

 

clientref4.PNG

 

If you need more help recording your client refunds, you can check this article: Record a customer refund in QuickBooks Online.

 

Do you have any other tasks like managing your other client's income and sales transactions? You can check our articles for guides: Sales and customers topics for QuickBooks Online.

 

Other topics can be found at the bottom of the page. 

 

Don't forgot to visit this thread or post a new question if you have other concerns regarding QuickBooks Online processes. Happy to show you a guide or two again. 

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