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Using QuickBooks to issue Credit Memos

August 11, 2019

Using QuickBooks to Issue Credit Memos and Refunds

There are times when you need to pay money back to your customers in the form of refunds or credit memos. Here is how QuickBooks does it.

We often think of QuickBooks as being there to help us get paid by our customers. After all, it has customizable invoice templates for customer billing and sales receipts for instant sales recording. It even supports payments online, allowing you to accept debit or credit cards as well as electronic checks. It makes the process of recording payments simple and it gives you reports that allow to you keep track of everything.

However, there are times when you need to pay money to a customer. Happily, QuickBooks also has forms for these funds transfers as well. They are refunds and credit memos. If you are not familiar with how to use these tools, here is a quick run through.

Credit Memos

A credit memo is for customers who return an item that they have already paid. The credit memo is to credit the customer for the cost. Of the two procedures, this one is more complicated. It takes more bookkeeping because you need to track the sale, the payment, and the return of the item. There are three ways to with the credited amount:

Retain the funds as a credit in the customer account

Issue a refund

Apply the refund to the following open invoice

You have three options for returning the money when issuing a credit memo for a customer
You have three options for returning the money when issuing a credit memo for a customer

                                             

When creating a credit memo, start by clicking Refunds & Credits on the QuickBooks’ home page. Or you can go to the Customers menu and choose Create Credit Memos/Refunds. Pick the desired Customer:Job. Choose the merchandise that was returned from the line items on that form. If the customer is returning more than one item, repeat the process as needed. Enter the quantity for each item returned as well. Click Save & Close. This will open the Available Credit window (in the image above). Simply click on the button by the option that you desire.

Retain Refund as Credit

If you have chosen the first option, click OK. The window closes and your customer’s refund will have been credited to their account. You see this if you go to the Customer Center. Go there and click on Customers on the navigation toolbar or alternatively, Customers | Customer Center. Click the Customers & Jobs tab and then scroll down to see the appropriate customer’s record and highlight it. Another route is to go through Transactions | Credit Memos.

Giving the Customer a Refund

When you choose to Give a Refund click there and then go to the Issue a Refund window. Normally this is all filled in and you only need to add the method of payment. Should you choose Cash in the Issue this refund via drop down list, QuickBooks will automatically subtract the amount from the customer’s account. If you choose Check and the person’s Account, make sure to click the checkbox by To be printed. In this case, the refund will be listed the next time you open your File menu, Print Forms | Checks. Should you choose to pay by credit card, check the box by Process credit card refund when saving box and the credit card refund is issued automatically.

Note: If you cannot work with credit cards because you have not set up a merchant account, contact us for help in setting one up.

The Issue a Refund window
The Issue a Refund window

                                                                                       

If the customer has an open invoice the best route may be to apply the refund to reduce their balance. When the customer has an open invoice the Apply Credit to Invoices window opens showing any and all unpaid bills. To use this option, make sure there is a checkmark in front on the invoice you want to apply the refund to. QuickBooks tells you how much credit is being applied and if any remains. Double check for any mistakes and click Done.

Using QuickBooks to Deal with Overpayments

Sometimes when a customer is paying on several invoices, they may send a check to cover the total and mistakenly overpay. When this happens, open up the Receive Payments window either by clicking Receive Payments on the home page or going through Customers | Receive Payments. In either case, choose the appropriate customer and enter the Payment Amount and their Check #. You will see that QuickBooks has already put check marks in front of all paid invoices.

Look in the left lower corner for the Overpayment section. Here is where the overpayment amount will appear along with two options QuickBooks offers for dealing with this issue. You will either issue a refund or credit the customer’s account. Simply choose the option that you want and save.

Use QuickBooks’ built-in tools to credit a customer if he or she overpays you.
Use QuickBooks’ built-in tools to credit a customer if he or she overpays you.

                                                     

You can also issue refunds through the Write Checks window, but this is a more complicated procedure. It’s easier to process a credit memo.  

If you are uncertain about any part of this discussion, please contact us for help. Although customers may be late in paying you, they can become quite upset when you have their money and don’t respond promptly. To learn the ropes of refunds and credit memos, feel free ask us for assistance getting it right from the start.

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