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How do I clear an overpayment on an invoice?

I am using Quickbooks 2015 for Mac

A customer overpaid by $100. Therefore, I have a payment which shows $100 unapplied.

We issued a refund check, which is showing as a Check for $100 in the Customer account, which is posting to our Checking Account and debiting an account named "Refund."

But I cannot seem to find a way to connect the refund check to the $100 unapplied on the payment. I see no way to do this inside of the Customer Payment screen for that particular payment. Nor do I see a way to do that on the Check screen.

Since I did not create the refund check, I am not sure how the user did it. But when I enter the payment with $100 unapplied on it, I see no way to create a refund check or credit memo there.

Help?  Thanks in advance!

Solved
Best answer 12-10-2018

Accepted Solutions
Established Community Backer ***

From the QuickBooks users guide. To write a refund che...

From the QuickBooks users guide.

To write a refund check:

When you need to refund a customer some money, create a credit memo first. Then you can write a refund check.

  1.   Open the credit memo you want to use for the refund.

  2.   Click Refund at the top of the window.

  3.   Make sure all the information on the check is correct.
    Caution: Leave Accounts Receivable as the account in the detail area of the refund check. This ensures that QuickBooks will account for the credit and refund correctly.

  4.   Click OK.

Although you have recorded both the credit memo and the check, you still need to connect the check to the credit memo so that QuickBooks can track the transaction correctly. You use the Receive Payments window to connect the two.

To connect the refund check to the credit memo:

1  Choose Customers > Receive Payments.

2  Choose the customer to whom you just wrote the refund check. You'll see the amount of the credit

included in the Existing Credits field and the refund check in the bottom section of the window.

3  Select the Apply Existing Credits checkbox.

4  On the Refund Chk line, enter the check amount in the Payment column, if not already entered by QuickBooks, and then click OK. If you now choose Customers > Create Credit Memos/Refunds to display the credit memo you just entered and click Tx History, you should see the refund check listed in the Transaction History - Credit memo window. 

25 Comments
Established Community Backer ***

From the QuickBooks users guide. To write a refund che...

From the QuickBooks users guide.

To write a refund check:

When you need to refund a customer some money, create a credit memo first. Then you can write a refund check.

  1.   Open the credit memo you want to use for the refund.

  2.   Click Refund at the top of the window.

  3.   Make sure all the information on the check is correct.
    Caution: Leave Accounts Receivable as the account in the detail area of the refund check. This ensures that QuickBooks will account for the credit and refund correctly.

  4.   Click OK.

Although you have recorded both the credit memo and the check, you still need to connect the check to the credit memo so that QuickBooks can track the transaction correctly. You use the Receive Payments window to connect the two.

To connect the refund check to the credit memo:

1  Choose Customers > Receive Payments.

2  Choose the customer to whom you just wrote the refund check. You'll see the amount of the credit

included in the Existing Credits field and the refund check in the bottom section of the window.

3  Select the Apply Existing Credits checkbox.

4  On the Refund Chk line, enter the check amount in the Payment column, if not already entered by QuickBooks, and then click OK. If you now choose Customers > Create Credit Memos/Refunds to display the credit memo you just entered and click Tx History, you should see the refund check listed in the Transaction History - Credit memo window. 

Not applicable

Thanks @SkinnyRaven   But what do I do with the unapplie...

Thanks @SkinnyRaven  

But what do I do with the unapplied $100 overpayment? Is it possible to create a debit memo in Quickbooks, to apply that to?
Established Community Backer ***

Backup your file first. Now make a credit memo, go back t...

Backup your file first. Now make a credit memo, go back to the refund check and change the account assignment from "Refund" to "Accounts Receivable". If this works as expected now you can link the two from recieve payments. If that doesn't work start over and follow the proceedure from the users guide.
Not applicable

This no longer works for quickbooks online is there any s...

This no longer works for quickbooks online is there any support for this process in QBO?
Established Community Backer ***

"I see no way to create a refund check or credit memo the...

"I see no way to create a refund check or credit memo there"

When you already have the overpayment, you don't ALSO want a Credit Memo. That would be a duplicate entry for the same value. The overpayment already is an AR credit.

The refund check needs to post as AR for "the reason" of this expenditure, for that customer name. That makes it available as if it is an invoice, to apply the credit against.

Not applicable

Bingo! That works.  I was going to go around the world an...

Bingo! That works.  I was going to go around the world and do a credit memo against "deposits" account, apply refund check to it, and just add $100 expense to "deposits" on the overpaid invoice, and apply the overpayment there....and began to pine for the days of working with Solomon/Dynamics SL--whew, you know it's bad! ;-)

But you pinpointed the problem...the user changed the refund check's account from "Accounts Receivable" to "Refund" and that's why it didn't show up for me to apply the $100 unapplied payment to.  

Thank you, @qbteachmt !
Established Community Backer ***

No one is lazier than me, for staying out of the deep end...

No one is lazier than me, for staying out of the deep end of the pool :smile:
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Do these instructions apply to the desktop version AND on...

Do these instructions apply to the desktop version AND online?  While the instructions to post as AR make sense, A/R is not an option in the account assignment when creating a refund receipt.  Some posts have suggested deleting the refund receipt, but I need it to match up with the bank transactions.
Established Community Backer ***

"While the instructions to post as AR make sense, A/R is...

"While the instructions to post as AR make sense, A/R is not an option in the account assignment when creating a refund receipt."

The point is to use AR on the Check "expense" because that overpayment already exists.

"Some posts have suggested deleting the refund receipt, but I need it to match up with the bank transactions."

Your Expense entry as a check will already do this.

You have to understand Two Conditions:

Either you Already have too much money from an Overpayment against AR as Payment;

Or, you are now issuing the refund from a Credit Memo as a refund, because you didn't already Owe them the money.

Two completely different scenarios and the point is not to do Both, for the same scenario. Once you have Negative AR, don't Also create a credit memo and refund, because while those two offset each other, you would still have negative AR from the overpayment or prior condition.

This applies to Any method of bookkeeping using AR.


Established Community Backer ***

Re: Thanks @SkinnyRaven But what do I do with the unapplie...

You'll need an invoice for any overpayments.

Community Explorer **

Re: "While the instructions to post as AR make sense, A/R is...

I have a similar problem but am not sure how to apply your advice to it....

Back in August I sent the customer the same $1000 invoice twice - they paid both, so I owe them $1000.  I advised them of my mistake (sent a credit note), and this month they deducted the $1000 overpayment from our $4000 November invoice, resulting in a new deposit for $3000.  If I try to create the split deposit so it shows as a match, using both the Nov invoice and that earlier credit, it is adding the $1000 credit to the new $4000 invoice for a total of $5000 vs. subtracting that overpayment to make $3000....  I'd appreciate any pointers - thank you!

Established Community Backer ***

Re: "While the instructions to post as AR make sense, A/R is...

This is an Error and you just did the same entry twice using two different methods: "I advised them of my mistake (sent a credit note),"

Credit Note = makes negative AR

Overpayment, if you used receive payment, also created negative AR

= Twice the negative AR, from two different methods.

 

Delete the credit memo. Apply the overpayment you already have to the Invoice they underpaid. You should have applied it when you first made the invoice that was going to use it, to show the customer only the $300 was left owed.

 

"and this month they deducted the $1000 overpayment from our $4000 November invoice, resulting in a new deposit for $3000."

 

Delete the Credit memo. Your current Negative AR for the customer of $1,000 for the overpayment gets applied to the $4,000 invoice; that leaves $3,000. Now process their check.

QuickBooks Team

Re: "While the instructions to post as AR make sense, A/R is...

Hello there, @Daren.

 

Thanks for posting this concern in the Community space. I can help you settle the overpayment and apply it to the next invoice.

 

You'll just need to delete the duplicate invoice and it will result to an outstanding credit balance amounting to $1000.

 

Here's how:

  1. Go to the Customers menu.
  2. Open the invoice.
  3. Right-click on the invoice page and select Delete Invoice.
  4. Click OK when prompt to confirm.

Then, link the available credit to the $4000 November invoice through the Receive Payments window.

 

Here's how:

  1. In the Customer Payment window, select the customer from Received From.
  2. Enter the $1000 amount on the Payment Amount.
  3. Check the invoice with an open of $4000.
  4. Click Save and Close.

Once done, apply the remaining $3000 deposit to the open invoice.

 

That's it! You should be able to apply the overpayment and deposit to your open invoice. Let me know how things go and if you have other question by leaving a reply below. I'm always here to help. Have a lovely day!

Community Explorer **

Re: "While the instructions to post as AR make sense, A/R is...

@qbteachmt - thank you for simplifying this for me, it worked as it should:

apply the original overpayment and the new "under" payment to the current invoice, it all adds up.

Thank you!

Community Explorer **

Re: "While the instructions to post as AR make sense, A/R is...

@MariaAlmaT - you and @qbteachmt had the same advice in different terms - your point of view helped me unravel this puzzle.  Thank you!

Not applicable

Re: "While the instructions to post as AR make sense, A/R is...

I have the exact same issue - last May 2018 I sent the same invoice twice to a customer, and the customer paid both - and this was just discovered (in Jan 2019).  My question is - will deleting an invoice from last year mess up the 2018 accounting books for my customer and/or for myself?

QuickBooks Team

Re: "While the instructions to post as AR make sense, A/R is...

Thanks for joining the thread, kstrong1109.

 

I'm by no means an accounting professional. However, I'd like to join this discussion and share some insight that can help you get you on the right track.

 

Ideally, transactions that were entered in error should be deleted to avoid any discrepancies. By doing this, the payment applied to the duplicate invoice will be recognized by QuickBooks as a credit for your customer, as mentioned in the awesome answer provided by my colleague, MariaAlmaT.

 

However, since you mentioned these transactions were from a previous year, you may wish to seek additional guidance from an accounting professional. That said, I'd highly recommend we ask for @qbteachmt's opinion on this matter.

 

Don't hesitate to reach out to me here in the Community with any additional questions or concerns you may have. Thanks for dropping in, wishing you and your business only the best.

Established Community Backer ***

Re: "While the instructions to post as AR make sense, A/R is...

"will deleting an invoice from last year mess up the 2018 accounting books for my customer and/or for myself?"

 

Yes, that will make a Mess of things. You have a Dated Sale, and even Worse, because that is Paid, deleting it changes Everything. That includes if you are subject to sales taxes. Never Do This.

 

@AldrinS

 

Please Learn from this input.

 

This is a Mistake: "Ideally, transactions that were entered in error should be deleted to avoid any discrepancies. By doing this, the payment applied to the duplicate invoice will be recognized by QuickBooks as a credit for your customer,"

 

You only do that if you just made the entry and Just now also discovered it was wrong. This one is Paid; that means it shows on Cash and on Accrual Basis. Deleting it changes Everything and that is historic = in 2018.

 

You can Reverse a mistaken sale by Offsetting it with a Credit Memo dated Now. Typically, you would Apply the credit to the unpaid sale. Right now, you have no Unpaid Sale for this customer. So, make a Credit Dated Now, using an Item that you want to use to either Reverse the original duplicate sale. Or, you can use an Other Charge type item linked to Income, for "return/allowances" the same as you see on your Tax form. Then you can Refund the customer from the top of the credit memo.

Not applicable

Re: "While the instructions to post as AR make sense, A/R is...

Ok, thanks very much for clearing that up for me!  

Not applicable

Re: "I see no way to create a refund check or credit memo the...

@qbteachmt Can you please help me with this step-by-step? 

 

I too have customers that have overpaid invoices and there are now credits sitting on their accounts. I want eo clear these credits by the end of the fiscal year. I have written a check in the credited amount, but I don't understand how to reflect this in QBO. I first did a refund receipt for them with the check number and everything, but it did not clear the credit on their account. How do I clear the negative balance/credit from the customer's account? I'm not understanding the "the refund check needs to post as AR for the reason of this expenditure." Can you please help me with that part?

QuickBooks Team

Re: "I see no way to create a refund check or credit memo the...

Hi there, @jmlover87.

 

I can help you clear out the negative balance/credit from your customer's account and get you back on track.

 

Using the check or expense to record the refund reduces your bank's balance, and offsets your customer's open credit, over-payment, or prepayment.

 

To do that you'll need to the check that you've created:

 

  1. Select Plus icon (+) on the Toolbar.
  2. Under Vendors, choose Check.
  3. In the Account column, choose Accounts Receivable.
  4. Enter credit, prepayment, or overpayment amount in the Amount column.
  5. In the Customer column, choose the customer.
  6. Select Save and close.

Once done, link the check to the credit:

  1. Select Create (+).
  2. Under Customers, choose Receive Payment.
  3. Fill out the following fields:
    • Customer
    • Date
    • Payment Method
    • Reference No.
    • Deposit To
    • Memo (Optional)
  4.  Under Outstanding Transactions, select the Check or Expense that you created.
  5. Under Credits, select the Unapplied Payment.
  6. Make sure Amount Received is zero.
  7. Select Save and close.

For complete details about this process, please check out this reference: Record a customer refund. 

 

If you need additional assistance with these steps, feel free to reach out to our Customer Care Team. They have essential tools like the screen-sharing to walk you through the procedure.

 

Of course, I'm still here to help if there's anything else you need. Just let me know by leaving a reply below. Have a good one!

Not applicable

Re: "I see no way to create a refund check or credit memo the...

Hi @BettyJaneB 

 

That worked! Thank you so, so much! Should I keep the "Refund Receipt" transaction I'd created or no? I'm thinking no since the check number was already recorded in the "Check" transaction. 

 

I'm doing this for a 501c3 non-profit, so I'm  trying to learn my way as I go in QBO and sometimes it feels like one thing makes sense, but just doesn't work the way you know it should. :smileylol:

QuickBooks Team

Re: "I see no way to create a refund check or credit memo the...

It's my pleasure helping you out, @jmlover87.

 

Yes, you are correct. You don't need to keep the refund receipt since the transaction has been recorded in the check and keeping it will affect your bank balance, not the customer's balance.

 

I'm including here a video tutorial about using QuickBooks Online, so you can explore its features and processes of handling transactions. 

 

You can always post here in the Community if you have any concerns with QuickBooks. I want to ensure you'll be taken care of. Wishing you and your business continued success :)!

Not applicable

Re: "I see no way to create a refund check or credit memo the...

Hi @BettyJaneB!

 

Me again with another, related question. 

 

How would I properly reflect a credit card refund? I have the refund confirmation through the "Refund Receipt" I processed, but again...it didn't clear the credit from the account. Would I still process a "Check" to attach the AR to clear the credit and just reference the "Refund Receipt"? That doesn't seem proper, but I can't think of another way. 

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