How to record a vendor refund

Thanks for sharing your insights with us, @Tim 0083,

We want to make sure you get the best service you've paid for. I can share a few insights to help you record the refund from your vendor.

Normally, once a payment is applied to the bill, the Accounts Payable balance is relieved. Thus, explains why you're unable to apply a vendor credit to it. A vendor credit decreases the Accounts Payable balance, once applied as payment.

When you apply it to a closed bill, it will give you an alert to create a new open bill, because there is no A/P balance to offset.

However, if you want to apply it to the original bill, you can delete and recreate the payment. Here's how:

1. Find the bill payment by going to the Expenses tab.
2. On the list, click the bill payment of the closed vendor.
3. Click on More, then Delete.
   
4. Press Yes to confirm the action.
    

Once deleted, open the Bill and apply the vendor credit in the payment. Here's how:

1. On the bill, click Mark as paid.
2. Mark the vendor credit in the Credits section.
3. Then click Save and close.
   

This is how the credit works after:

To learn more about this, please see this article: Applying vendor credits

If you have additional questions about this, please get back to me so I can help you further. I want to make sure you get the answers you need to get this resolved. Have a good one!

Thank you for responding to my concerns. However, this only proves my point. All of these steps just to document a refund. This is so unnecessary!  In my business, material returns are the norm. Having to do it this way you risk losing insight of the materials purchased by deleting the expense/bill, then having to go back and create it again just to apply credits.  Please fix....Thanks!

Hi Tim,

I can see how important it is for you to be able to track the returned materials. I'll share a different approach for your scenario that doesn't require you to delete the original expense or bill transaction.

Phase I: We bought materials from Home Depot using our debit account.

Phase II: We record the refund and correct the quantity of the materials.

First, record a vendor credit and put all the purchased materials, and make them billable to the project. This transaction will update their quantity in your inventory, will show credits from the vendor, and offsets the pending billable expense on the project profile.

Second, deposit the refund to your debit account and categorize it as Accounts Payable to show that it was coming from the vendor (Home Depot).

Third, offset the bank deposit and the vendor credit by creating an expense or a check transaction. The purpose of this is just to close both transactions under your vendor's profile. You will also not incur any expenses here since the final amount will just turn into zero.

Fourth, go to your project profile and close the pending billable expenses. If you can notice, you will end up having a zero invoice the billable expenses from the vendor credit will just offset the total amount.

Lastly, you can check the quantity of the items, the balance of your debit account, the vendor balance, and the projects.

That's it. I know that this looks like a long process because we put this into writing. However, when you record these transactions, it will only take you a minute or two, depending on how many items you have.

If you have questions along the way, please don't hesitate to go back to this thread. I didn't add any article links above to avoid confusion, but you can find them on the main QuickBooks Support page.

I have to agree with Tim that the process for doing this is BEYOND ridiculous and not at all intuitive.  I am a CPA with more than 20 years of experience (mostly using larger, more sophisticated systems).  I normally delegate A/P duties but every time I have to do this myself I literally spend an hour trying to figure it out (after guessing and messing everything up and then having to undo everything and research the process online as I'm doing again right now). And why does it let you enter a vendor's name in the bank deposit if it doesn't actually associate the transaction with that vendor when you subsequently look at the vendor activity?  Incoming funds always default to go to a customer/client, but whenever it's a vendor it makes no sense (the same goes for refunding money back to a customer).  Why is is necessary to enter a whole separate document and then match it with a bank transaction and then create a third transaction to offset them? Additionally, the bank deposit under the vendor's name doesn't show a status such as "paid" or "applied" as with the other transactions and the sum at the bottom makes it appear that the credit memo and the deposit are two separate credit transactions that are duplicating each other (although running an aging will show that the balance is apparently correct).   QuickBooks Online is supposed to be quick and easy but this process is SO cumbersome and stupid. 

While I'm ranting about A/P, why on earth doesn't QB let you enter separate invoice dates and posting dates? Often vendor invoices are received after the period in question has been closed so they have to be posted in the next period (by entering an invoice date that is later than that shown on the actual invoice). However, this screws up the aging and can cause payments to be delayed/paid late. Other systems have two dates, one for the real invoice date, one for the period it needs to be posted in. QB really needs to add this if they expect anyone but tiny companies who don't produce accurate financial statements to use the product--all the workarounds are ridiculous.

I couldn't agree more!  This is ridiculous.  I just want to post my refund and have it show in my vendor file.  There was no bill - it was just an expense.  I don't need a credit memo - I have nothing to apply it too.  In trying to make this so simple for business owners who have no idea about accounting - they've created a monster for those of us that do know what's going on.   There are many good things with quickbooks, but they've ties the hands of accountants.  Why does it seem like Intuit does not actually talk to accountants when setting some of these things up?  

In complete agreement with the rest of these comments. Quickbooks ought to change its name to Ridiculouslyand UnecessarilyCumbersomeBooks.

@Tim 0083 Did this answer solve your problem and work for you? I still have the exact same question almost 3 years later and have spent hours researching on these forums for an answer. Thanks!