Occasionally it may be necessary to write a customer a refund check. This process is one method that once setup is easy to use and ensures your accounting and the customer’s account are accurate. This method is when the refund needs to be in the form of a check. If issuing a credit card or cash refund see the additional information at the end of this knowledgebase article.
There can be several reasons why you may need to give a customer a refund.
- The customer returned product which they had already paid for.
- The customer was overcharged and has already paid.
- The customer cancels a pre-paid service agreement and you agree to refund for unused visits.
The above reasons will require creating a credit memo to the customer’s account.
- A prepayment was entered as a deposit then the customer decided to not have the work done.
- Customer has overpaid an invoice on their account.
- Customer has an open credit on their account which they are asking to be refunded.
Whatever the reason for the refund, the story will pause with “And now the there is a credit on the customer’s account which needs to be refunded by check.”
This process involves using a method of payment that is pointed to an AR wash/clearing account. Then the same account is used when writing the customer’s check.
Create an AR wash/clearing account if you do not already have one.
- Select Company → Enter Chart of Accounts.
- Click Add New.
- In the Account field, use a number close to your existing Accounts Receivable account.
- Select 01 Cash for the Category.
- Enter "AR Wash" or "AR Clearing" (or something similar) for the Description field.
Create a RefundCk method of payment.
- Select Receivables → Payment Methods.
- Click Add New.
- Enter RefundCk in the Payment Method field.
- Enter "Refund Check" in the Description field.
- For Account Number, select the wash/clearing account you just added to the Chart of Accounts.
- Set the Type field to Credit.
Details to Use
As mentioned the customer at this point should have a credit on their account. Enter a credit memo if needed.
Pay the credit with the RefundCk method of payment.
- Select Receivables → Enter Payments.
- Select appropriate customer and date.
- Select RefundCk for the Payment Method.
- Check # - (optional) Enter the word Refund and the check # you plan on writing to the customer. This text will display on customer statements.
- Check the Pay column next to the credit item. This could be either a credit memo or a pre-payment depending on the situation.
Write the check
- Select Banking → Write Checks.
- Fill out the check as usual. In Pay to: drop down select Customer and then select the customer from the drop down.
- In the bottom Account field select the same AR Wash/Clearing account created above for the RefundCk method of payment.
The customer’s account will now have a zero balance.
The AR Wash/Clearing account will have a zero balance.
- Credit from the method of payment.
- Debit from the check.
When doing a credit card refund in Step 1 the normal credit card method of payment can be selected such as MC, VISA or AMEX. A negative amount will appear in the make deposit screen where it can be grouped with the rest of the daily credit card batch.
Note: ESC can’t issue credits to the customer’s credit card. It will be necessary to use your credit card processor’s web portal to credit the customer’s credit card.
When doing a cash refund in step 1 the normal cash method of payment can be selected. A negative amount will appear in the make deposit screen for your daily cash deposit.
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