I need to partially refund ($100) a partial payment ($200) of an invoice ($1000).

I know exactly what to do when your customer partially paid for a canceled job, kim. Let me share some ideas and walk you through the process.

You can create a refund receipt to keep track of the money you send back to the client. Here's how:

1. Click on + New.
2. Select Refund receipt.
3. Pick the customer you want to refund from the Customer ▼ dropdown.
4. Fill in the details in the fields using the same info from the original sale. To credit back their credit card, in Payment method, choose Credit card. To credit back their bank account, in Payment method, choose Direct Debit.
5. Go to the Refund From, and choose the account you wish to refund the customer from.
6. Click on Save and close.

Then, enter a credit memo for the remaining balance. Once done, apply the credit to the invoice by receiving the payment. This will then close the invoice. See this link for the detailed steps: Create and apply credit memos or delayed credits in QuickBooks Online.

Lastly, since your customer canceled the job, this is most likely considered uncollectible sales or bad debts. In this case, you can write it off. This also keeps your accounts receivable and net income stay up-to-date.

I've also added this article in case you want to learn more about personalizing invoices in QBO: Customize invoices, estimates, and sales receipts in QuickBooks Online.

Keep in touch so we can help you further with invoices. We'd also answer queries about QuickBooks in general. Keep safe.

Hi Mich_S

Sorry I am quite new to this. I have already matched their initial partial payment to the invoice when it appeared in banking. So when I go to 'receive payment', the due amount is already less their initial payment of the deposit. So I should skip all of the numbered steps you listed?

The partial refund I paid the customer via bank transfer is now sitting in my banking. Is there a way to match up this with the refund receipt when I create that? Or do I just process the refund transaction as an expense and categorise it into 'Sales-Income' where I believe their initial payment was categorised?

The remainder of the invoice and the amount they were refunded was all costs for labour hours that will not occur now the job is cancelled. Is that still bad debt? When I am not actually out-of-pocket for anything? 

Hope that makes sense. Thanks for your help

Hi kimboc!

Thank you for coming back and for asking for clarifications. Let me continue to help you with your refund.

Yes, you can skip the steps for creating a receive payment since you've already matched the downloaded partial payment transaction to the invoice.

What you'll want to do is to create a Refund receipt amounting to $100 to reflect the money returned to your client. Then, yes, match it to the transaction sitting in your Banking. After that, you can create a Credit memo amounting to $800 with the same item on your invoice and use it to pay the invoice.

Make sure to disable the Automatically apply credits option in your settings before creating a credit memo, so it won't be auto-applied to any of the open invoices of the customer.

1. Go to Settings ⚙, then select Account and settings.
2. Select Edit ✎ in the Automation section.
3. Turn off the switch for Automatically apply credits.
4. Select Save, then Done.

Create a credit memo:

1. Select + New and choose Credit memo.
2. In the Customer dropdown, select the customer's name.
3. Enter the credit memo details, such as the date and the amount. Use the same item on the invoice.
4. Click Save and close.

Apply the credit memo to the invoice:

1. Select + New and choose Receive payment.
2. In the Customer dropdown, select the customer.
3. In the Outstanding Transactions section, select the open invoice you want to apply the credit memo to.
4. In the Credits section, select the credit memo you created.
5. Leave the Payment method, Reference no, Deposit to, and Amount received fields blank.
6. Fill out the rest of the form, including the Payment date.
7. Make sure the total is correct after applying the credit memo.
8. When you're done, select Save and close.

The refund receipt and the credit memo will revert the income from the invoice. Therefore, there's no need to record a bad debt, which is also not suitable in this case since the sale was canceled. You can check your customer's balance in their profiles to see the effect the transactions.

If you have any other concerns about the transactions, just go back to this thread so we can continue to assist you. Have a good one!

Hi JessT,

This all makes sense, thanks for the clear instructions!

Only thing is I don't have 'Credit Memo' as an option in the +New list or anywhere else I can see. There is 'Adjustment Note'... is that the same?

Cheers

Hi JessT,

This all makes sense, thanks for the clear instructions!

Only thing is I don't have 'Credit Memo' as an option in the +New list or anywhere else I can see. There is 'Adjustment Note'... is that the same?

Cheers

Thanks for coming back, kimboc.

Yes, a credit memo and an adjustment note are the same things, and the terminology varies depending on which QuickBooks Online region you use. Instead of a refund, some customers prefer to receive a credit that they can apply to the balance on their next invoice. There are several methods for handling credits in QuickBooks. You can enter an adjustment note to reduce a customer's current balance immediately, or you can enter a delayed credit for them to use later. This is how to make an adjustment note:

1. Click the + New Plus icon. 
2. Select Adjustment note.
3. In the Customer dropdown, select the customer's name.
4. Enter the adjustment note details, such as the date and the amount. Tip: You can create a custom credit service item so you can quickly add it to adjustment notes as a single line item.
5. Press Save and close.

You can check out this article for more details on how and when to give an adjustment note or delayed credit to customers: Create and apply adjustment notes or delayed credits in QuickBooks Online. Here's an additional guide to using the Receive Payments function: Receive Payments.

Don't hesitate to click the Reply button below if you have follow-up questions about processing a refund. Please know I'm always around to help with any QuickBooks issues you may be having. Take care always.