Refunds are used to pay back customers who have a credit balance. Customers may have a credit balance due to an overpayment, a credit issued after an amount was paid in full, or a cancellation. It is important to ensure any cancellation or administrative fees are processed prior to processing a refund.
In this article:
- Credit Card Refunds (All Licensing)
- Other Payment Type Refunds (Full Financials Licensing)
- Other Payment Type Refunds (Non Full Financials Licencing)
Credit Card Refunds
Credit card refunds are processed the same way whether you use the full Financials Suite or not. You can process full or partial refunds of payments which have been charged to credit cards.
- Credit card refunds are subject to payment processor restrictions. For example, if the payment was made more than 180 days prior to the refund, the payment processor may reject the refund. You would need to complete the refund using the merchant account or by processing it as a check (cheque) refund.
- To refund a partial credit card payment, the credit card processor must also allow for partial refunds. If the credit card processor does not allow for partial refunds, the full transaction should be refunded.
- You cannot process refunds larger than the original credit card transaction.
To process a credit card refund:
- Navigate to the Accounts page and search for the Account that should receive the refund.
- Right click on the Account and select View > Receivable Ledger. The Receivable Ledger window opens.
- In the Receivable Ledger tab, find the credit to be refunded.
- Right-click on the line that holds the credit and select Tools > Refund Credit Card. The Add Payment window opens with the necessary information defaulted into the fields.
- Update the amount if the refund is a partial refund.
- Click OK. The refund transaction will be added to the Receivables Ledger. No payables voucher will be created, as it is assumed the credit card refund will be processed via the merchant.
If you receive an invalid tender message while attempting to process a credit card refund, verify the Date is set to the date of the original payment and the Original Transaction drop-down is populated. Also verify the amount is negative, and check the Use Order Default Charge Card check box.
Refunding credit card payments is controlled by the following access privileges: Allow Electronic Credit Card Refunds and Allow Electronic Credit Card Refunds Without Original Trans.
Other Payment Type Refunds (Full Financials licensing)
If you use the Full Financials Suite, all non-Credit Card refunds are initiated from Accounts Receivable as an adjustment, then processed through an accounts payables Payment Batch.
If configured correctly, refund adjustments will automatically create an unbatched accounts payable voucher to be used to pay the refund back to the customer via bank transfer or check (cheque).
Configure GL Accounts and Transaction Types for Customer Refunds
To issue customer refunds through Accounts Payable, the GL account and transaction types need to be configured.
- Add a Refund Clearing GL account among your other system clearing accounts and ensure it is marked as a Control Account. See GL Accounts for details on adding GL accounts.
- Add a Transaction Method with the details below. See Transaction Methods for details on adding transaction methods.
- Code: RFD
- Description: Refund
- Add a Receivable Transaction Type with the details below. See Receivable Transaction Types for details on adding receivable transaction types.
- Description: Name for the refund. Best practice is to use Refund in the description, so it is easy find when adding the adjustment.
- Type: Adjustment
- Source: All Sources or Accounts Receivable
- Method: Choose the method you created in step 2 called Refund.
- Currency: Only necessary if needed for currencies other than local (***).
- GL Transfer check box: check this to allow for generation of journal entries.
- Refund check box: check this to create an unbatched voucher for the refund on saving adjustment.
- On the GL Distribution tab, set the following credit and debit GL accounts.
- Credit: Refund Clearing (created in Step 1). Note that the voucher uses the same GL account to create the balancing entry.
- Debit: Trade Debtors/Accounts Receivable (the GL account used as a sales ledger control account).
If you have selected any source other than All Sources in step 3 above, you may need to add more transaction types for any other sources where you will need to create refunds; for example, Payment Plans or Events. If you have chosen All Sources, you will not need to create any other transaction type for refunds as this Receivable Transaction Type will be available in all parts of the system.
Add a Customer Refund Payment
After you have completed the necessary configuration above, you can use the Receivable Transaction Type to issue a refund. This part of the process is usually carried out by the department which looks after invoicing and applies payments.
To add a customer refund:
- Navigate to the Accounts page and search for the Account that should receive the refund.
- Right click on the Account and select View > Receivables Ledger. The Receivables Ledger window opens.
- In the Receivable Ledger tab, find the credit amount you want to issue the refund against. Note the invoice number.
- Right-click and select Add Payment. The Add Payment screen opens.
- Add the following details:
- Transaction: Select the Refund transaction type.
- Amount: Enter the amount of the refund as a positive number into the Amount field.
- Enter any additional transaction type fields as required.
- Click OK. The Customer Refund Voucher Created message displays. Make note of the voucher number.
- Click OK. The refund is processed on the account and an unbatched voucher is created in Accounts Payable.
- Generate the cash and adjustment journal entries, as required.
Process a Customer Refund
Once an unbatched AP voucher has been created, you can process the refund in an Accounts Payable (AP) batch. This process is usually carried out by the person who creates your regular AP batches.
To process the refund:
- Navigate to the Voucher Processing page and click Tools > Unbatched Vouchers. The Unbatched Vouchers window opens.
- Find the voucher created in the Add a Customer Refund Payment process, right-click > Edit.
- Review the following:
- Invoice field: if required, enter the invoice number noted down in the Add a Customer Refund Payment process.
- In the Taxes section, review the taxes. Typically there are no taxes selected for refund but, if this is required for your organization, select a non-reportable tax resource.
- In the Voucher Distribution tab, verify the GL Distribution is debiting the same refund clearing account configured on the the Transaction Type set up in Configure GL Accounts and Transaction Types for Customer Refunds.
- Click Save (disc icon). The Voucher is saved but the Edit Voucher window remains open.
- In the View dropdown, select A/P Demographics. The A/P Demographics window opens.
- Check the Default Payment Method field and if the method is Electronic Transfer, ensure the correct Bank information is entered in the Bank Information for EFT tab. See the A/P Demographics article for more information.
- When the A/P Demographics window has been reviewed/updated, click OK. The A/P Demographics window closes, and you return to the Edit Voucher window.
- Click OK. The Edit Voucher window closes and you return to the Unbatched Vouchers page.
- Right-click on the Voucher line and select Create Voucher Batch. The Create Batch window opens.
- Check the Transaction Date for the Payment Batch and add a Description, if you prefer a customised description. If no description is added, the description will default to Accounts Payable.
- Click OK. The Edit Voucher Batch screen opens. At this stage the GL distribution or tax information for the voucher should not be adjusted.
- Click Tools > Post Voucher Batch. The Post Voucher Batch screen opens.
- Click Post. A success message shows momentarily and the Voucher Batch status changes to posted.
- Process the voucher in a Payment Batch as usual. See Supplier Payments for more information about Payment Batches.
- After you post the accounts receivable and accounts payable journal entries, reconcile the transactions in the Refund Clearing account so they net to zero. It's important to note, this may already be part of your regular reconciliation process.
- In the customer's Receivables Ledger window, find and select the transactions to be internalized.
- Right-click on one of the selected lines and select Edit Multiple. The Edit Multiple Receivable window opens.
- Check the Internal checkbox and click OK. The window closes.
- To check for internalized transactions in a customer's Receivable Ledger you can add the Internal column to your view. Any transactions with a Yes in this column will not show on standard customer-facing reports.
Other Payment Type Refunds (Non-Full Financial Licencing)
If you do not use the Full Financials Suite, all non-Credit Card refunds should be added as a negative payment. This can result in either only a debit on the customer's receivable ledger, or it may also create a journal entry to be sent to an external financial system via an integration.
Add a Refund as a Negative Payment
A negative payment refund is added to reverse an amount of the initial payment, using the same transaction method. For example, if there is a check payment for 100.00, enter a check payment for -100.00 for the refund. A negative payment does not require any additional configuration but is not as easily identifiable as an adjustment.
There are various places you may want to add your negative payment, and your choice should be based on how the original payment was added to Enterprise. If your original payment was added to:
- An order: follow the Add a Refund as a Negative Payment to an Order steps.
- An invoice: follow the Add a Refund as a Negative Payment to an Invoice steps.
- The Receivables Ledger of an account: follow the Add a Refund as a Negative Payment to the Receivables Ledger steps.
Add a Refund as a Negative Payment to an Order
To refund a credit on an order:
- Navigate to the Events page and find the Event which has the order to be refunded.
- Right click on the Event and select Edit > Edit Event. The Edit Event window opens.
- In the Orders tab, find the order with the credit amount to be refunded.
- Right-click on the order and select Edit > Edit. The Edit Service Order window opens.
- In the Payments tab, click the Add button. The Add Payment window opens.
- Enter the necessary information:
- Date: Date of the original payment.
- Transaction: Original transaction type.
- Amount: Negative amount of the original payment.
- Enter the information in any other required fields, as per your organizations practices.
- Click OK. The amount of the negative payment will now balance against the original payment. Process the refund to the customer using your organization's normal Accounts Payables process.
Add a Refund as a Negative Payment to an Invoice
To refund a credit on an invoice:
- Navigate to the Invoice page and find the invoice to be refunded.
- Right-click on the invoice and select Add > Add Payment. The Add Payment window opens.
- Enter the necessary information:
- Date: Date of the original payment.
- Transaction: Original transaction type.
- Amount: Negative amount of the original payment.
- Enter the information in any other required fields, as per your organizations practices.
- Click OK. The amount of the negative payment will now balance against the original payment. Process the refund to the customer using your organization's normal Accounts Payables process.
Add a Refund as a Negative Payment to the Receivables Ledger
To refund a credit on the receivables ledger:
- Navigate to the Accounts page and find the account to be refunded.
- Right-click on the account and select View > Receivables Ledger. The Receivables Ledger window opens.
- In the Receivables Ledger tab, find the line which holds the credit amount.
- Right-click and select Add > Add Payment. The Add Payment window opens.
- Enter the necessary information:
- Date: Date of the original payment.
- Transaction: Original transaction type.
- Amount: Negative amount of the original payment.
- Click OK. The amount negative payment will now balance against the original payment. Process the refund to the customer using your organization's normal Accounts Payables process.
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