303: Recording A Refund Transaction In QuickBooks Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant
- Financial Adventure, LLC
- May 14
- 8 min read
303: Recording A Refund Transaction In QuickBooks Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
If you have a situation where you need to refund your customer the money they have paid you, you want to make sure that you are doing it correctly so that everything clears out in the customer’s account and they show the correct balance due if they have one, or that their account balance is zero if they no longer owe you any money. Refunding a customer seems so simple, but many of my clients struggle with how to record the transactions in their bookkeeping system. Most will issue a check for the balance they want to refund, but the confusion normally comes when they need to record the refund in QuickBooks. You may be having the same issues if you are using another bookkeeping software system, but as long as you follow a few key steps, your refund will be recorded correctly. In today’s podcast episode, I’m diving into how you should be correctly recording how you refund your customers in QuickBooks so that their balance is not only correct but everything is linked correctly in your bookkeeping system as well. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, keeping your customers satisfied by refunding any amounts owed to them and recording it correctly in your bookkeeping software will help eliminate any clean up in the future and ensure your financial statements are accurate. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
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Show Notes:
If you have a situation where you need to refund your customer the money they have paid you, you want to make sure that you are doing it correctly so that everything clears out in the customer’s account and they show the correct balance due if they have one, or that their account balance is zero if they no longer owe you any money. Refunding a customer seems so simple, but many of my clients struggle with how to record the transactions in their bookkeeping system. Most will issue a check for the balance they want to refund, but the confusion normally comes when they need to record the refund in QuickBooks. You may be having the same issues if you are using another bookkeeping software system, but as long as you follow a few key steps, your refund will be recorded correctly. In today’s podcast episode, I’m diving into how you should be correctly recording how you refund your customers in QuickBooks so that their balance is not only correct but everything is linked correctly in your bookkeeping system as well. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, keeping your customers satisfied by refunding any amounts owed to them and recording it correctly in your bookkeeping software will help eliminate any clean up in the future and ensure your financial statements are accurate. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
Welcome Back…There are many situations where you may need to refund a customer. They may have overpaid an invoice, asked for a refund, paid the wrong vendor, or they may simply have a credit balance outstanding that they will not be able to use in the future. In the last podcast episode, I covered when you might need to issue a credit memo to a customer. When you issue a credit to a customer, it may also leave a credit balance where you may need to issue a refund to your customer. Whatever the reason you have for needing to refund your customer, you want to make sure you do it correctly so that the customer receives their payment, their accounts receivable balance shows the correct amount due, if any, and that all of the transactions in QuickBooks or any other bookkeeping software are linked correctly.
If you are issuing a credit memo in QuickBooks, you will be prompted with options as to how to handle the credit. You have the option to retain as an available credit where you could use this credit on a future purchase, give a refund or apply it to an existing invoice. If the customer isn’t requesting a refund, either the retain as an available credit or apply to an existing invoice option would work, but if your customer is requesting a refund, you will want to select the give a refund option. When you do this, QuickBooks will help to automate the process of refunding your customer. You will fill out the information listed and decide how you would like to handle the check payment by either selecting to be printed, or manually filling in the check information if you are handwriting your refund check. You can go back to your customer center and select that specific customer to see how the payment was applied to the credit memo.
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If you already have a credit outstanding for your customer without issuing a credit memo, you can refund your customer in a few different ways. One of the easiest ways to refund your customer would be to go to your banking tab and select write checks. You would then select the customer that you want to issue the refund to and enter the amount you are refunding them. The key when you are refunding your customer this way is to make sure you use the accounts receivable account for the transaction account as well as entering the customer’s name in the customer or customer job column. When you do this, you are telling QuickBooks that the refund is coming from the accounts receivable account and it is for that specific customer. As with any check you enter in QuickBooks, you can select to print the check or you can record the manual information if you are handwriting the check. With this option, you can also go back to the customer center and pull up this customer to see if the check is recorded on their account. You will need to take one extra step to make sure that QuickBooks is linking the refund to the credit amounts on that client’s account. To do this, you will go to the receive payments screen, select your customer and you will need to click on the credits and discounts button in QuickBooks Desktop or in QuickBooks Online, you will see the credits show up as well as your refund check. You will need to apply the credits and the refund check to each other so that QuickBooks knows that these transactions are complete. If you don’t do the receive payments step, you would see that in your customer center, your customer would have a zero balance if the refund brought them to a zero balance, but if you looked at your accounts receivable summary report, you’ll still see your customer show up on this report with a zero balance. Once you do the receive payment step, they will no longer show up on your accounts receivable summary report.
Making sure that you are taking the steps to be sure that the way you are refunding your customers by not only sending them the money they are owed but also making sure that your bookkeeping system is reflecting each transaction correctly will help you maintain an accurate set of financial statements. Your customer’s account balances are reflected in your accounts receivable balance on your balance sheet. If this balance is wrong, your financial statements will not be accurate. If you need help with setting up efficient processes in your business, make sure that you sign up for one of my free consultation sessions, you can go to www.FinancialAdventure.com and click on the work with me button.
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