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How to issue Customer Refunds in QuickBooks

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How to issue Customer Refunds in QuickBooks


{EAV:bba2004cd39d2a00} <– Ignore this, I am just trying to verify my new blog here with Empire Avenue and then I will remove this

Customer Refunds seem pretty straightforward and normally they are. Once situation came up however in my QuickBooksAnswers.Info community which actually presented a challenge beyond the normal, simple process of issuing customer refunds in QuickBooks.

Normally when you issue a refund in QuickBooks the process is simple because you have an fully paid invoice and now the customer wants a refund, or a partial refund so you go in and simply create a credit memo for the amount to be refunded and then you refund that amount. Pretty simple, pretty straightforward.

This week my client had a little different situation in terms of the amount of the invoice and the refund. You see she issued an invoice totaling $2,500 and then received a deposit from her customer for $500. The customer decided not to go through with it and the deposit was refundable so now my client has a problem. She has to issue a credit memo for the full $2,500, but only $500 needs to be refunded.

Your assignment:

Open up a QuickBooks File (create a new company if need be so you can play) and re-create the scenario. See if you know what to do before watching the video or reading on.

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The answer turns out to be pretty simple ONCE YOU SEE IT! Before actually seeing what it looks like it can be confusing, especially if you don’t have the accounting mind like I do to know how to think these things through.

Thinking It through

Break the transaction up in to it’s parts.

  1. I need to credit the entire $2,500 back since none of the services have been provided and that’s what I billed the client. So for sure we need a credit memo for $2,500. In the video I told you to use the same item as what was invoiced because we are fully refunding the sale. This is not a “discount” so we want to deduct it directly from the income item – especially if there were taxable items involved. This will offset the sales taxes we would otherwise owe.
  2. Now it’s a question of what to do with the credit. When we save the Credit Memo QuickBooks will prompt us and ask us what we would like to do with the credit.
  3. We split it up. $2,000 of the credit gets applied to the invoice, and $500 is refunded.

If you haven’t already, watch the video to see what this looks like.

Did you try it on your own first? How did you do? Please post your comments and questions below.

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About the Author:

I started Nerd Enterprises, Inc. in 2003 and continue to work with individuals and companies to cure their financial headaches. Training, writing, blogging, social media and generally building communities around these areas as well as technology has become another passion of mine.

Discussion

  1. JANE  July 25, 2013

    When we make a credit memo and return cash to the customer this is touching out bank account as a check. Can this go into the undeposited funds clearing account instead of a bank account?

    (reply)
    • NERD  July 25, 2013

      If you don’t want it to touch the bank account then you can simply leave the credit to be applied to a future invoice. You would never want to post anything to undeposited funds. If you are refunding a customer’s credit card then it will go into undeposited funds as a negative number. This can then be combined with the appropriate days CC funding so that your net deposit in QuickBooks matches the net that funds to your bank account from that day’s activity.

      (reply)
      • DAVID GOODIN  November 18, 2013

        Unless the net cc from that was was more money out of e bank than in. In that case, what to do? All I can seem to find as far as “help”‘is people say ” it’s complicated”.

        (reply)
        • NERD  November 18, 2013

          If you processed refunds in excess of charges on a particular day then this is the one case where QuickBooks will actually let you record a negative deposit. You have to use the QuickBooks forms – enter credit memos/refunds and then choose to refund the customer via CC. Then QB puts the negative amount in undeposited funds and you can select that amount to be included in a deposit and QB will let you do that. Be sure of course to net that out with any charges from that day so you get the exact amount that the bank will show as money “out” from your account that day.

          (reply)

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