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Record a refund for an overpayment or credit in QuickBooks Online
If you have QuickBooks Payments, you can refund a customer who has a credit or has overpaid. This involves creating an expense or check to record the refund and then linking it to the customer's credit to make sure your accounting is accurate.
To issue a refund directly in QuickBooks, check out QuickBooks Payments rates and apply.
This video will go over how to issue a refund if you used QuickBooks Payments to charge your customer, and then go over how to issue a refund for any other kind of payment.
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Video transcript
[0:00] When you need to refund a customer, there are two ways to record it in QuickBooks. Let's go over how to issue a refund if you used QuickBooks Payments to charge your customer, and then go over how to issue a refund for any other kind of payment. Note that this is for refunds only.
[0:16] If you want to give someone credit that they can use on a future purchase, you would use a credit memo, and there's a link to that video over here. If you used QuickBooks Payments to process a payment from your customer, go to the sale you recorded. If it is an invoice, select the link to the payment. Then select More…Refund.
[0:37] Note if it is a sales receipt, just select more and refund right from the sales receipt. Select Yes, refund payment. QuickBooks fills out a refund receipt for you based on the original sale. Confirm the information.
[0:55] Select save and send if you want to email it to your customer or choose another save option if you don't. Once you are done, select save and send if you want to email it to your customer or choose another save option if you don't. If you received a payment in any other way, select New…Refund Receipt. Note that these steps record the refund in QuickBooks.
[1:19] If you use an outside payments processor like Stripe or Paypal, you'll still need to process the refund with them to get the money back to your customer. If you know the customer's name, enter it here. But you can also leave this blank. Enter when you refunded your customer. Then enter the payment method, which is how you paid the customer back.
[1:41] If you don't see the correct payment method, select Add new. Note that this only records the refund. To pay the customer back, you'll still need to write them a check or process the return with your payment processor. In the Refund From field, enter the account you used to refund them. This will usually be a bank account.
[2:02] If you wrote them a check, you can enter a handwritten check number or print it later if you want QuickBooks to print it for you. If you need help with that, see the link at the end of this video. Next, enter the product or service you refunded them for. Then the dollar amount. If this is a taxable product, QuickBooks will also include sales tax.
[2:24] This refunds the customer for the sales tax you collected, and it also reduces your sales tax liability. Once you are done, select save and send if you want to email it to your customer or choose another save option if you don't. Later, when the refund clears your bank or credit card, you'll see it in the Transactions screen.
[2:44] QuickBooks will match what you've downloaded to the refund receipt you entered earlier. Select Confirm to connect what you recorded to what you downloaded to make sure QuickBooks doesn't count it twice. Now you're ready to record refunds to customers in QuickBooks.
What you’ll need
The customer's preferred payment method.
The bank account you are refunding from.
Details of the original overpayment or credit.
Create a refund expense or check
First, create an expense or check to record the refund transaction.
Go to Home
(Take me there).Select Expense, Add expense, or Check.
From the Payee dropdown menu, select the customer you want to refund.
From the Payment account dropdown menu, select the bank account from which you are issuing the refund.
In the Category column, select Accounts Receivable on the first line.
In the Amount field, enter the total refund amount.
Fill out any other necessary fields.
Select Save and close.
Link the refund to the customer's credit
Next, link the refund to the specific overpayment or credit on the customer's account. This step is completed automatically if you have automation for applying bill payments turned on.
Select + Create.
Select Receive payment.
From the customer dropdown menu, select the same customer.
In the Outstanding Transaction section, select the checkbox for the expense or check you created.
Note: If you have automation to apply bill payments turned on, this step is done for you.Verify that the payment amount equals the open balance.
Select Save and close.
Results
After you save the payment, QuickBooks links the refund to the credit, clearing the customer's overpayment balance. Your accounts receivable and bank account balances will be updated automatically.
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