Recording Returned Payments

Recording returned payments in QuickBooks Online (QBO) is easy, and I'm here to guide you on how, @SamanthaSB.

You can either record returned customer payments using an expense or a journal entry. Any of the processes can get tricky, so I'd recommend consulting your accountant to help you handle the next steps and keep your financial data accurate.

If you opt to use an expense to record a customer's returned payments, follow these steps:

1. Enter the bounced check/returned payment as an expense.

2. Unapply the bounced check/returned payment from the original invoice.

3. Create an item for fees (wire fee charged) from your bank.

4. Enter the service fee the bank charged you.

5. Create an invoice for the bounced check fees to send to your customer.

6. Send a statement to your customer.

After you forward the statement to your customer, they know what they owe and why. Then, once they pay you for the original invoice and the bank fees, you can follow the normal steps to receive their payment. 

For the step-by-step guide, you can refer to this article: Record a returned payment using an expense.

If you want to use a journal entry to record a customer's returned payments, please check out this article for the detailed steps: Record a returned customer payment using a journal entry.

Then, in case the returned payment was made by your customer via bank transfer, you can handle this situation to keep your books in order by following the steps in this article: Handle a rejected or failed bank transfer payment.

Also, QuickBooks provides a variety of reports to get the information you need for your business (i.e., customer and sales reports). You can pull up one, then customize it to focus on specific accounts or filter for certain things.

Please keep me posted on how it goes. Let me know in the comments if you have other concerns about recording returned payments in QBO. I'm always around to help. Take care and stay safe always, @SamanthaSB.

In my situation the payment was issued to a vendor.  I was given the wrong account information, and the payment I attempted was reversed. Is the process still the same in this case?

I can help you record the returned payment, @SamanthaSB.

When you enter a returned payment for a business expense or canceled project, you can record the fund by linking a bank deposit to a vendor credit. If you have created a bill, make sure that you added the bill and paid it properly. This way, you can have accurate vendor expenses and credits.

Once done, you can enter a vendor credit to ensure that the credit hits the expense account you use for that vendor. Let me show you how:

1. Click the + New button and then select Vendor credit.
2. In the Vendor drop-down, pick the vendor.
3. Enter the category, product, or service that valued the returned payments.
   
4. Click Save and close.

Then, you'll have to deposit the money you got from the refund back to the account you use for the payment:

1. Click the + New button.
2. Select Bank Deposit.
3. In the Account drop-down, choose the account where you want to deposit the money.
4. Go to the Add funds to this deposit section and select the vendor who gave you the refund. Also, add the wire fee charged (amount is in minus to negate the total returned payments).
5. Choose Accounts Payable from the Accounts column.
6. Enter the amount of your refund.
   
    
7. Click Save and close.

Lastly, link the bank deposit to the vendor credit using the Pay Bills option:

1. Click the + New button.
2. Choose Pay Bills.
3. Select the bank deposit you just created. (The amount of the vendor credit will show in the Credit Applied field, and the Total payment should be $0.00.)
   
    
4. To complete the process, click Save and close.

I've also included additional information about handling vendor credits and refunds in QuickBooks Online: Manage vendor credits.

If you have recorded expense transactions in error, you can edit or delete them anytime.

That's it! In case you have additional follow-up concerns or clarifications, please let us know so we can assist you. We're always here to give you a hand. Have a nice day ahead!

My question still isn't answered. Sorry if I'm not following. 

I made a wire transfer payment to a vendor for a one time service. I was given the incorrect account information and the payment was returned, minus the wire fee. I want to know how to categorize those transactions, The payment was later made and recorded. I am just a little stuck on how to account for the returned payment. 

HI I agree with the OP. The question here is not answered and I have now looked at 8 different "answers" provided by QBO and none give me the information for this issue. How do we fix a returned payment and re-issue?

To OP: MY guess is that we delete the returned payment attached to the still-open bill. Then we put that payment and its return both into some account we do not care about, like "Miscellaneous." Then we re-issue the payment and record against the original bill. As far as the miscellaneous account, the sum of the two transactions should be 0. When bank fees are paid out: if its a separate transaction from the return, then record it separately, but if you were returned less than what was paid, do a JE debiting Bank fee and crediting Misc so that the sum is 0.00 between the original payment ad the return.  Hope this helps and hope QBO become smart enough to learn to give real answers to real questions and not just take the easy way out by pretending they are giving us the answers to the problems their system creates. 

Completely agree. Quickbooks is terrible for real life situation like returned wire transfers where bank takes a cut of the amount returned.

Nothing QUICK about trying to resolve that..

I ran into a similar issue with a returned Western Union transfer.  The business attempting the transfer couldn't fully process the payment so it ended up looking like an expense followed by a deposit.  My temporary workaround was to make it an expense and then create a second line in the transaction as the return so the net balance is zero with hopes it won't throw off income total on the P&L report.  Do you think this is the correct solution?

Thank you so much, MayaD77!   I had had the same situation and was getting nowhere with the replies given by QuickBooks... they just didn't seem to even understand the question and gave answers that simply didn't apply.  Your method worked just right.  I deleted the original payment that didn't get sent correctly from the bank's bill-paying service, and instead I created a "check" payable to "miscellaneous customer" and used the "miscellaneous expenses" category; saved that, then created a deposit by using "add funds to this deposit" where "received from" was the bank, "miscellaneous expenses" was the category, and the description said "BillPay refund from payment made in online BillPay that was never received by the vendor".  Then as you said, that payment and the refund canceled each other out as they should have done in the miscellaneous expenses account.

I've got a similar situation.  Paid two bills to the same vendor via wire and recorded the payments in QB.  Bank returned the payments a week later as the vendor's bank account was incorrect, less a fee.  I voided the original payment, which put the bills back into unpaid status, and entered the fee as an expense.    I wish there was a way to enter the returned payment as a bank deposit, apply the deposit to the payment (thereby effectively voiding the original payment and re-opening the bills for payment).  That way you wouldn't corrupt your audit trail.   

Old thread, but I found while searching for a similar problem, and in case it helps someone else, this solution using journal entries worked pretty well for me:
https://quickbooks.intuit.com/learn-support/en-us/banking/recording-returned-payment/00/1166543