Understanding Refunds for Voided Invoices

I appreciate you for posting here in the Community, JSmith151. Let me provide information on managing refunds in your QuickBooks Online (QBO) to ensure accurate customer balances.

Based on your example, there was an unapplied payment of $360, while a new invoice, (1137) was created for $200. Since the unapplied payment doesn't fully apply to the invoice, resulting in the customer's negative balance of -$160. The refund receipt is only recorded in the customer transaction and doesn't impact the customer's overall balance.

The best way to handle customer refunds varies in specific circumstances. In your scenario, you can delete the previous transaction and record the refund as an expense.

Here's how:

1. Select + New and click Expense.
2. Choose the customer you want to refund from the Payee dropdown.
3. Click the bank account where you deposited the overpayment in the Payment account dropdown.
4. On the first line of the Category column, choose Accounts Receivable.
5. Enter the amount you wish to refund in the Amount field.
6. Fill in the necessary fields, then select Save and close.

Now, you can link the refund to the customer's overpayment by following the steps below:

1. Click + New and choose Receive payment.
2. Select the same customer you used for the expense when recording the refund.
3. Fill in the necessary fields.
4. In the Outstanding Transaction section, check the box for the Expense you created when recording the refund. If you have automation to apply bill payments turned on, this step is done for you.
5. Ensure the payment equals the open balance, then select Save and close.

Furthermore, you can reconcile your accounts to match your bank and credit statements.

If you have any further concerns regarding refund transactions for your customers, please don't hesitate to contact us. We'll be happy to assist you.

@JSmith151 

The refund receipt is the problem.  That transaction is not being applied to the customer's A/R credit balance if $160.  Use an Expense transaction (New > Expense) and not a Refund Receipt.  I know it sounds odd to use an Expense transaction for this but that is just what the form is called in QBO.  The reason it works is because you can select the customer, A/R, and issue payment from the Expense form.  On the Expense form, select the customer, payment account, and select A/R as the Category.  That offsets the customer's overpayment but you still need to tie those two transactions together.  To do that, go to Receive payment and apply the $160 credit created by the overpayment to the $160 "invoice" created by the Expense transaction.