How to refund sales order prepayment in QB Enterprise

Let's make sure to get this sorted out, Capan.

You'll have to convert the sales order to an invoice. Then, receive the prepayment amount. Once done, use a check to record the refund. This reduces your bank's balance and offsets the customer's open credit, overpayment, or prepayment.

Then, write a check. Follow the steps outlined below:

1. Go to the Banking menu.
2. Select Write Check.
3. Under the Expenses tab, select Account Receivables account for the prepayment and enter the amount. 
4. Click Save & Close.
   

After that, receive payment in the amount:

1. From the QuickBooks Home page or the Customers menu, select Receive Payment.
2. In the Received From drop-down, select the customer's name you used for the check or expense when recording the refund.
3. Enter the Amount received.
4. Make sure the date is correct, then choose the Payment method.
5. Select the invoice or invoices you'd like to pay.
6. Click Save & Close.

Furthermore, learn from this article how you can handle credit or refund a check to give back the money to your customer. I've added this article for more details: Give Your Customer A Credit Or Refund In QuickBooks Desktop.

You can always get back to us here if you have further questions about prepayment. I'm always right here if you need further assistance.

I appreciate the reply but this doesn't seem like the best way in practice. way to many steps to cancel and refund a simple customer deposit. 

1) Converting to an invoice will also change inventory and add item history that didn't happen with an item we didn't have (why we are cancelling the backorder) which makes any inventory issues down the road have extra fake transactions that never happened. 

2) to receive the prepayment on an invoice, there would have to be something invoiced, then a credit made off the invoice creating a false item history. 

I don't understand why the transactions are "locked" to SO. I get it in theory, but there needs to be a way to release this. If the same transaction happened prior to this feature, we would have received a customer payment and created a SO. Then when customer cancels order days/weeks later, all we had to do is close so, and go to the payment and select Refund to customer. Simple and quick. 

There should be NO reason to create a posting transaction (invoice) to close a sales order and refund a deposit. 

Also in the second part you mention re-receiving the customers payment with the original date so it lines up with bank deposit. What if the deposit has already been reconciled with bank online in the register in QuickBooks? Then we'd have to delete and reenter a deposit just to cancel a order with a deposit? 

There is nothing to invoice. Customer cancelled an order with a deposit. 

@capandhitch2 

When you turned on the prepayment function, you had to select or create a liability account that would record the prepayment.  When you refund the prepayment, I think all you need to do is issue payment to your customer and assign the same liability account to the refund that was assigned to the prepayment. That will zero out the liability account and you will have both a deposit and a payment to reconcile your bank account.     

Thanks for the reply. Only issue with that is there is no way to write a check from undeposited funds (so the credit card/bank reconciled). When i go to write check, there are only options for "bank" accounts not undeposited funds where we typically would refund customers from (since its a credit card transaction and the daily batch needs to align, we cannot refund direct from bank account unless writing a physical check)

I also saw this (pasted below) from QB regarding setting the feature up. My first thought was using the account we set up when turning this feature on, but as explained below, I see it creates 2 fake accounts which from what i can see are not accessible so not sure. I just cant believe there isn't a way to just close the order, and have it ask what you want to do with the prepayment. In all the instructions for the process of SO deposits, there is no mention of closing the SO or refunding a prepayment. Seems to be a large oversight, obviously some sales orders with prepayment will need to be cancelled with backorders. 

How QuickBooks applies prepayment credits

QuickBooks creates two general journal entries for each prepayment credit when you apply it to an invoice.

To see these in QuickBooks, go to the Customer Center and find the Customer/Job you created an Invoice for, and applied a Prepayment credit.

You’ll see two general journal entries for each prepayment credit.

• The first general journal entry ‌is mapped to a liability account with a positive amount.
• The second general journal entry is mapped to an A/R account with a negative amount.

Note: The Account for Prepayment Transfer in both general journal entries is an inactive account QuickBooks creates. QuickBooks uses it to transfer an amount from a liability account to an A/R account.

@capandhitch2 

"Only issue with that is there is no way to write a check from undeposited funds (so the credit card/bank reconciled). When i go to write check, there are only options for "bank" accounts not undeposited funds where we typically would refund customers from (since its a credit card transaction and the daily batch needs to align, we cannot refund direct from bank account unless writing a physical check)"

Then record it using an Expense (New > Expense).  It's not technically an expense obviously, that's just the transaction type.  Select the liability account under 'Category' and select Undeposited Funds under 'Payment account'.    

QB creates the first journal entry (JE) to the liability account when you receive the prepayment and creates the second JE when you create the invoice.  

I suppose that is a work around. I also took care of one by invoicing a non inventory item/service, applying prepayment, then creating a credit memo from it. Either way works for now I suppose, but I think Intuit needs to fix this process. Shouldn't have to create accounts, or enter "fake" transactions by invoicing to refund a simple cancelled order. We try to keep customer/item history as clean as possible. We have a large amount of customers and a large amount of transactions. Navigating through fake transactions and histories just makes warranty process and inventory control even harder. As I mentioned previously, the "old" way just required going to the payment, and selecting refund to customer. It should be that simple IMO.

Thanks for your help!

For example, this is the transaction history for 1 sale that was cancelled. Cust gave deposit of $240 and ordered 11/15. He ordered wrong part, had to pay a restocking fee of $120, and we owe him a 120 refund. Made one invoice off the Sales order for the restock of 120. Remaining 120 payment still locked, even thought it has been partially invoiced, and the remaining items Closed.

Have to make a 2nd fake invoice for a non inventory item, then do a credit memo against it, and then refund customer from accounts receivable. Total of 8 transactions to be able to process the $120 refund. This is a nightmare for tracking customer history as well. 

anybody come up with a better way yet?

Anyone?

Bueller?

I used the "item"  Job Deposit on my invoice for the amount to be refunded and wrote in the description "Job Deposit - refund amount" then entered the amount to be refunded in the rate. Applied the entire prepayment to the invoice. Then, create a credit memo to the item Job Deposit and use the credit memo to issue a refund.

Thanks for the update, @Gingern.

I appreciate you sharing the steps you've taken to refund sales order prepayment in QuickBooks. I'm sure other users who encounter the same concern will find your resolution helpful.

Please don't hesitate to drop by the Community if you have other questions about QuickBooks. We're always here to lend you a hand. Take care, and have a great day ahead.

That's basically what I'm doing as a work around. Issue is, we are a high volume business doing a lot of special order stuff with delays. It just creates a bunch of "fake" transactions/history under the customer which makes tracking things down in the future more difficult. Not to mention, IMO refunding a deposit should be as simple as clicking "Mark as Closed" and a pop asking what you would like to do with the prepayment instead of creating fake invoices and credit memo's (similar to going to a unassigned payment where it asks what you want to do with the payment). Intuit needs to come up with a simple solution. The added deposit feature is great for many reasons, but this is a huge issue. Have a hard enough time getting my employees to do transactions properly as it is, let alone adding 8 steps to a simple refund. 

Its not really a solution, its a work around. A solution would be a simple refund process just like it is on a standard payment that has not been applied. Should not need to create fake items, invoices, and credit memo's to refund someone. also, should not have to add 7 transactions in customers history for a cancelled sales order. 

OLD WAY:Create sales order, receive payment. Customer cancels, just need to refund payment, and close Sales Order

NEW WAY: Create Sales order/receive Payment/create dummy invoice/credit memo/refund/journal entry in/journal entry out

That is 7 transactions for a cancelled order in the customers history.