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Highlighted
Level 1

Balancing Credit and Refunds for customers

A pre-payment was collected from a customer. The pre-payment was applied to the customer; however, the customer was due a refund since the pre-payment was more than the invoice. Under Customer, Create Credit Memos/Refunds was selected and a credit memo created which also created a subsequent Refund record. Now there is a negative amount in the Balance total for the Customer on the Customers & Jobs screen, that is equal to the refund. The credit memo indicates that there is no available credit. Under Refunds, it shows the date and the amount.
How do I reconcile this so that the Balance total for the Customer on the Customers & Jobs screen is 0?

3 Comments
Highlighted
Level 15

Balancing Credit and Refunds for customers

"The pre-payment was applied to the customer"

 

Applied? How did you process the prepayment when you first got it? As "receive payment" creating negative AR, or using a Customer Sales Receipt? You don't want to hold it as negative AR. You use an Other Charge Type item. That links to Liability, if you are allowed to carry liability. Otherwise, Prepayments are a type of Income for you.

 

"however, the customer was due a refund since the pre-payment was more than the invoice. Under Customer, Create Credit Memos/Refunds was selected and a credit memo created which also created a subsequent Refund record."

 

If you processed this using Receive Payment, you just Doubled that negative AR. The Credit Memo is Duplicate data. What you should do is use the same Prepayment item, from the sales receipt where you processed that you got the prepayment, on a Credit Memo. At the top of the CM, you use the icons to Apply to the invoice, and to Refund the balance. The CM ends at 0. The invoice is Paid and the date on the credit memo is the same or later than the Invoice you charged them on.

 

"Now there is a negative amount in the Balance total for the Customer on the Customers & Jobs screen, that is equal to the refund."

 

Because you have entered it Twice using two different methods.

 

"The credit memo indicates that there is no available credit. Under Refunds, it shows the date and the amount."

 

If you got the prepayment in the tax year you have not yet reported, you can make an Invoice now, dated back when you got the Prepayment, using that Item I explained. On your original Receive Payment, open that and apply it to the Invoice you just made. Open your Credit memo and put the Prepayment item there, as well. You didn't explain how you "applied" the prepayment to the actual invoice.

 

"How do I reconcile this so that the Balance total for the Customer on the Customers & Jobs screen is 0?"

 

You did too many things. What also matters is, are you allowed to hold prepayment as liability or not, and if not, as income, you need to know if that is subject to Sales taxes or not. It is either Taxable when you get it and Taxable on the CM (Reverses the original tracking). Or, Nontaxable coming and going.

Highlighted
Level 1

Balancing Credit and Refunds for customers

Thank you for the reponse. Regarding your questions:
Applied? How did you process the prepayment when you first got it?
Response:
The pre-payment was collected via credit card and auto deposited into the company checking account. In the checking account Register, the deposit Payee is set to the customer and the Account is set to Undeposited Funds. Also in the checking account Register, is a payment to the customer for the remainder of the pre-payment.

In Receive Payment, the pre-payment is assigned to the Customer invoice. There is a remaining open balance. How can the open balance be removed?

Highlighted
Level 15

Balancing Credit and Refunds for customers

This is How it got paid, not How you processed it: "The pre-payment was collected via credit card and auto deposited into the company checking account. In the checking account Register, the deposit Payee is set to the customer and the Account is set to Undeposited Funds."

 

That is Wrong. You don't put it as 'from UF" if you just got it. It would be From UF, if you made a sales receipt and the funds from the Sales receipt are waiting in UF to be matched to the CC settlement. Or, you Receive Payment against an invoice. You don't use UF manually; the Transactions use UF, such as Receive Payment can hit Banking directly or "group with UF" to make a Batched deposit later.

 

And working directly in the Register means you just bypassed everything about the Customer Part of this program. You don't work in the Register view. That is your perspective of transactions affecting Banking; you want to be making and using Transactions.

 

"Also in the checking account Register, is a payment to the customer for the remainder of the pre-payment."

 

Look at the left, to see Transaction Type. Is that PMT? DEP?

 

"In Receive Payment, the pre-payment is assigned to the Customer invoice. There is a remaining open balance. How can the open balance be removed?"

 

Let me see if this is what you wanted to tell us:

 

I first used Receive Payment, or you use Merchant Services, and this came in and is seen in the register as a PMT, so that means I realize this created Negative AR.

 

Later, we invoices, and I opened the original payment to apply it to the Invoice, which is dated later, so this is backwards.

 

And now I still see negative AR balance, which means I need to Return some of their funds.

 

So, I thought the right thing to do is issue Credit Memo, but now I realize that is a Duplicate transaction using two different methods that simply created the negative AR again.

 

If so, I described what to do:

Step 1. You use an Other Charge Type item. That links to Liability, if you are allowed to carry liability. Otherwise, Prepayments are a type of Income for you.

 

Step 2. Use that on an Invoice now, dated  for the date you Got the prepayment.

 

Step 3. Open the prepayment and Unlink it from the final invoice; link it to the Prepayment Invoice. All of it. That entire Prepayment Amount is what you need to enter in the Prepayment Invoice. And next time, you can do this as Sales Receipt, because this is how you Properly process Prepayments.

 

Step 4.  What you should do is use the same Prepayment item, from the sales receipt where you processed that you got the prepayment, on a Credit Memo. At the top of the CM, you use the icons to Apply to the invoice, and to Refund the balance. The CM ends at 0. The invoice is Paid and the date on the credit memo is the same or later than the Invoice you charged them on.

 

Please see my attachment.

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