Refunding sale when only paid partially or not at all - what to do with open invoice

Hi there, 

I can give you the steps on how to close the invoice.

If you're unable to collect the remaining balance from the customer, then you can write it off as a bad debt. To begin, you need to create a bad debts expense account. 

Here's how:

1. Go to Accounting > Chart of Accounts.
2. Click the New button.
3. From the Account Type drop-down menu, choose Expenses.
4. From the Detail Type drop-down, select Bad debts.
5. In the Name field, enter “Bad debts.” and hit Save and Close.

Next, add an item for bad debt by following these steps:

1. On the left panel, click Sales > Products and Services.
2. Select New, and then choose Non-inventory in the Type.
3. In the Name field, enter “Bad debts” and leave the Sales price/rate blank.
4. From the Income account drop-down, select Bad debts.
5. Click Save and Close.

Once done, you'll need to create a credit memo and apply it to the invoice you want to close. The steps are highlighted in the Steps 4-5 section of this article: Write off bad debt. It also contains the procedures on how to run reports for uncollectible receivables.

In addition, I've attached a link that will help you manage your invoice, sales receipt, and other sales forms in QuickBooks: Sales transactions.

Please let me know if you need more help with the process. Just leave a reply below and I'll get back to you as soon as I can.
 

It is not bad debt - the customer changed their mind and we still have the products.  They paid a down payment which we refunded.  How can I close the invoice properly in this situation? How do I record the refund that was paid via check?

We also have some of these where the customer changed their mind the same day after making a down payment of half of the sale amount.  The owners decided to hand them their check back instead of depositing it.  How would I handle these invoices?  They are in our Clover POS, so I can't not record them in QBO.

I'm here to help you with the refund process, @Questioner22. 

If your customer made a prepayment for an order but canceled it before getting the products or services, you can record a refund by creating a Check or Expense. This reduces your bank's balance while also offsetting the customer's prepayment.

Let me show you how:

Step 1: Record the refund for your customer

1. Click the + New icon and select Expense or Check.
2. Choose the customer you want to refund from the Payee drop-down list.
3. From the Payment account drop-down arrow, select the bank account where you deposited the payment.
4. On the first line of the Category column, select an Accounts Receivable.
5. Enter how much you want to refund in the Amount field.
6. Fill out the other fields as you see fit, then click Save and close.

Step 2: Link the refund to the customer's credit.

1. Select the + New icon and click Receive payment.
2. Choose the same customer you used for the check or expense.
3. Fill out the other fields as you see fit.
4. Under the Outstanding Transaction section, select the checkbox for the Expense or Check you created.
5. Make sure the payment is equal to the open balance, then click Save and close.

Furthermore, you can create a credit memo instead of voiding the invoice since you've already received half payment. Lastly, go to the Receive Payment tab and then apply the credit memo to the original invoice. Doing so will help zero out their amounts. 

Here’s how to create a credit memo in QBO:

1. Click the Plus (+) icon and select Credit Memo.
2. Choose the customer name.
3. Enter the Credit Memo Date.
4. Fill in the necessary information.
5. Click Save and close.

For your reference, you may check out this article for more details and how to apply the credit memo to your invoice: Apply a credit memo, credit or refund to a customer.

Additionally, you can run the Transactions List by Customer report in QuickBooks Online. This will show you the list of income and expense transactions grouped by customers. Just go to Reports and open the Transactions List by Customer report.

Let me know if you need anything else concerning the customer refund. I'm always around.