QuickBooks Tips

Issuing Credit Memos and Refunds in QuickBooks

10/15/2020

QuickBooks is very good at helping you get paid by your customers. It comes equipped with customizable invoice templates for billing customers and sales receipts for recording instant sales. It supports online payments, so you can accept debit or credit cards and electronic checks. It simplifies the process of recording payments and it offers reports that let you keep track of it all.

There are times, though, when you have to issue a payment to a customer. QuickBooks provides forms that allow that transfer of funds: credit memos and refunds. Do you know when and how they should be used? Here are the basics:

Credit Memos

A credit memo is just what it sounds like. A customer returns an item for which theyâ??ve already paid, and you have to credit him or her for its cost. This is the more complicated of the two and requires more bookkeeping since youâ??re tracking the sale, its payment, and the returned item. You can deal with the amount of the credit by:

  • Retaining the funds in the customer account.
  • Issuing a refund.
  • Applying it to the next open invoice.

 
Credit Memos And Refunds In Quickbooks

Figure 1: When you issue a credit memo to a customer, you have three options for returning the money they paid.

To create a credit memo, click Refunds & Credits on QuickBooksâ?? home page or open the Customers menu and select Create Credit Memos/Refunds. The Credit Memo window opens. Select the correct Customer:Job. In the line item section of the form, choose the merchandise returned in the Item column and enter a quantity. Repeat the process if more than one item was returned, then click Save & Close. The Available Credit window, pictured above, will open. Click the button in front of the option you want.

Select the first option if thatâ??s what you want and click OK. The window will close, and the customer will have had that credit amount applied to his or her own account. You can see this in the Customer Center if you click on Customers in the navigation toolbar (or Customers | Customer Center). You can then either click on the Customers & Jobs tab and scroll down until you can highlight your customerâ??s record or click on Transactions | Credit Memos.

Click on Give a Refund to open the Issue a Refund window. Everything should be filled in here except for the payment method. If you select Cash from the Issue this refund via drop-down list and then pick the correct account from the list that opens, the refund amount will be subtracted from the account. Select Check and then the Account, and check the box in front of To be printed. That refund will be in the list the next time you open the File menu, then Print Forms | Checks. Choose a credit card and check the box in front of Process credit card refund when saving box to issue a credit card refund automatically.

Tip: If you canâ??t work with credit cards because you donâ??t have a merchant account, please call and have a QuickBooks professional help you set this up.

 
Credit Memos And Refunds

Figure 2: The Issue a Refund window.

If there is an open invoice, the Apply Credit to Invoices window will open, containing a list of unpaid bills. If there isnâ??t already a checkmark in front of the invoice you want to apply it too, click in the first column to create one. QuickBooks will tell you how much credit was applied and whether any remains. When youâ??ve checked the screen for accuracy, click Done.

Dealing with Overpayments

Letâ??s say a customer is catching up on multiple outstanding invoices and he or she sends you a check for the total but overpays you. Open the Receive Payments window by going to Customers | Receive Payments or clicking Receive Payments on the home page. Select the customer and enter the Payment Amount and Check #. QuickBooks will have put a checkmark in front of all the outstanding invoices listed to indicate theyâ??ve been paid.

In the lower left corner, youâ??ll see a section titled Overpayment. The extra amount and your two options for dealing with it appear here. You can either credit the customer or issue a refund. Click the action you want to take, then save the transaction.

 
Credit Memos And Refunds In Quickbooks

Figure 3: If a customer overpays you, you can use QuickBooksâ?? built-in tools to credit him or her.

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

If youâ??re at all unclear about what is described here, please contact the office for assistance. Refunds or credits that come through incorrectly (or not at all) can make customers very unhappy and may affect future sales. Why not let a QuickBooks professional help you get it right the first time?

Ask a Question

Find comfort in knowing an Expert in accounting is only an email or phone-call away.

We Are Here to Help

We will happily offer you a free consultation to determine how we can best serve you.

Blog

Attestation Services: Compilations, Reviews, and Audits CPAs offer attestation services as unbiased options

frequently asked questions

  • What Is A Virtual CFO & How Can It Transform My Business?
    • a. A Virtual CFO can be a much-needed sounding board, coach, and guide. Outsourced Virtual CFO is generally not just one person, but an experienced team of professionals providing a full-stack Accounting and Finance Department at a fraction of the cost that it would otherwise cost a business to hire even just one full-time CFO internally. The right virtual CFO service team, such as the one at Perpetual CPA, can deliver timely, detailed, comprehensive financial reporting, interpret the financial data, prioritize recommendations, give expert guidance on how to execute those recommendations, and ultimately give a better path to business success.
  • How can a Virtual Accounting Department help small businesses scale and grow?
    • a. A growing number of small businesses are opting to outsource services such as IT, human resources, or accounting. The benefit of a Virtual Accounting Department is that the company can reduce or increase services to accommodate current business needs. Because the service provider has multiple clients they can absorb fluctuations in workflow more easily than the average small/medium business can on its own.

      b. A Virtual Accounting Department can integrate with a company’s own accounting department to create a blended solution or provide a full-stack accounting department, including Accounting Staff, Manager, Controller, and Virtual CFO. By using a Virtual Accounting Department Small business owners don’t have to worry about hiring, training, figuring out compensation, and payroll compliance for the internal accounting team. Also as the business grows and new and more complex accounting and tax issues come up, the outsourced Virtual Accounting Department can provide all the needed expertise to facilitate continued business success.
  • What are the benefits of hiring a CPA firm?
    • a. Certified Public Accountants (CPAs) do a lot more than just crunch numbers and prepare taxes. They provide valuable expertise and strategies to help businesses and individuals achieve their business and financial goals. A CPA firm can help small businesses with management financial reporting, tax compliance, strategic business advice, and much more. Firms like Perpetual CPA, that specialize in helping small and medium-sized businesses achieve growth, can also provide Virtual CFO services, that help the business owners have the foresight into the short-term future cashflows and be able to more successfully navigate their business performance.
  • What are the best strategies for small business growth?
    • a. A business growth strategy is, simply, a plan of how a business gets from where it is today to where it wants to be in the future.

      b. Some of the questions to consider when coming up with a growth strategy are:
      i. Where will the business get new customers from?
      ii. How will the business expand into new markets?
      iii. What new products could the business offer?

      c. In reality, what happens with many small businesses, is that they generally achieve a specific level of business activity or sales and then the business growth trend flattens. In those cases, working with a firm like Perpetual CPA, which provides Virtual CFO services, can help small businesses avoid stagnation. Virtual CFO services, aside from providing timely accounting and tax reporting, can also provide valuable insight into the current performance of the business, as well as, foresight into the future cash flows for the business. Perpetual CPA Virtual CFO team helps small businesses interpret their financial information and come up with business strategies to help improve business performance and achieve growth.
  • What are the best strategies for small business risk management?
    • a. A risk management plan helps a business develop a detailed strategy to deal with certain risks that are particularly important for the businesses’ success.

      b. For many small and medium-sized businesses, the easiest way to develop and implement a business risk management plan is to work with a reputable CPA firm, such as Perpetual CPA. Large corporations invest a lot of resources and time into managing risk, which is a material factor that allows those large corporations to continue to generate billions of dollars in revenue every year. Small businesses, however, almost never manage any business risks, which is the major reason that over half of all the small businesses do not survive for more than 5 years. Generally, small business owners are not experienced corporate business professionals and lack the needed business knowledge, yet they often have to wear many hats while trying to get their businesses off the ground. In those situations, a CPA firm such as Perpetual CPA, can help small businesses better manage tax compliance risks, cash flow, internal controls, business administration, financial reporting, and much more.
  • What is Strategic Advisory and Virtual CFO? / How do Strategic Advisory and Virtual CFO services work?
    • a. When small businesses start spinning wheels, it is a good time to consider hiring a reputable CPA firm, such as Perpetual CPA, which can provide both Strategic Advice and Virtual CFO services.

      b. As a strategic advisor, the CPA firm will work with business management to improve the effectiveness and profitability of the business. They will look holistically at the business and find ways to operate the business more efficiently, increase customers through additional or improved marketing or improve customer touchpoints and service.

      c. As a Virtual CFO, the CPA firm is like a part-time version of a traditional CFO or Chief Financial Officer plus a full Accounting support team. They perform the tasks that in a larger organization would be performed by the CFO, Controller, and Accounting Staff such as preparing and overseeing the budget process, identifying and analyzing current and future trends, and developing strategies for the business growth.
  • How can timely financial visibility and management reporting help with better business decisions and growth?
    • a. A simple way to a successful business is to prioritize the timely financial visibility and management reporting as it means:
      i. Timely financial information and analysis are essential for making informed decisions, evaluating your company’s results, improving financial performance, and ensuring you are on the path to meet your strategic goals.
      ii. Management reporting is a source of business intelligence that helps business leaders make more accurate, data-driven decisions. But, these reports are most useful if they are available timely and the management receives proper interpretation of the business financial information.

free initial 30-minute consultation

    © Perpetual CPA 2020   •   Site Map   •   Privacy Policy   •   Disclaimer   •   Powered By   Designed by Dot Com Media Moguls