QuickBooks Customer Credit Memos & Refunds

Posted by on Feb 5, 2011 in Customers Module | 0 comments

At some point in time dealing with your Customers, you will have to process a Credit Memo or Refund. These will be used to record the return of items sold, to reduce a customer’s outstanding account or to issue a customer refund.

For this example we are going to use the customer named Hart Printing. You will recall that in the last segment on  Memorized Transactions, there was an invoice created for a monthly consulting on-site visit. Using invoice number 20110104 we are going to credit six hours of consulting time, as the eight hour agreement has been reduced to only two hours.

Go to your Home page and click on the Refunds & Credits icon, which will open the Create Credit Memos/Refund screen. In the Customer:Job field select Hart Printing from the drop-down box or you can also start typing Hart and the full name will fill in the field. Tab to the Template field where you will see the default name of Custom Credit Memo.

Once again if you want to customize this template you can copy this one, change the name of it, set up your logo and change the layout to your particular needs.  As in an earlier segment, for the sake of saving you some time, I would suggest that you bring in a QuickBooks Trainer or ProAdvisor to help you with this.

With that being said, we will use the default template, and tab to the Date field. Since the original invoice was created on February 20, 2011, we will use the same date, tab and accept the default Credit No. assigned, tab to the P.O. No. field and key in this information if there was one used from the original invoice.

Since there was none used in our example, we will tab past the P.O. No. field to the Item field and stop. From the drop-down box we need to select the same item that was used to  create the charge on the invoice, which was Consulting – On Site. Tab to the Qty field and key in the number 6, since 8 was originally billed and we want to reduce the number to two. The Rate field will default to 60.00, in the Class field we will choose Printers, the Amount field has 360.00 (60 x 6) and the Tax code is H.

In the boxes at the bottom of the screen we want to make sure that To be printed and To be e-mailed are both checked. In the Memo field we are going to type in some brief words to describe “change in agreement for monthly billing“. The Total credit for this transaction will show as 403.20.

We will now Save & Close and at this time an Available Credit screen will pop up, which will ask us what would you like to do with the this Credit? Since we know that it is going to be used for a particular invoice, we will tag the Apply to an invoice button and then OK.  QuickBooks will now direct us to the Apply Credit to Invoice screen.

We can see that the 403.20 amount has been applied to invoice number 20110104‘s amount of 537.60 and we will click on Done to post the transaction. Don’t forget to print a copy for your records and email the Credit Memo to Hart Printing.

To see the results of this Credit Memo,  go to the Customer Centre, click on Hart Printing and you will see the Credit Memo amount having been applied, with the resulting outstanding balance now sitting at 134.40 (537.60 – 403.20).

I’m going to skip ahead one month, after Hart Printing paid the 134.40 balance in the account. What has taken place subsequently to that payment, is that the agreement was cancelled and only one hour of consulting took place.

Because there will be no future business with Hart Printing, we need to return 67.20 to the Customer via a cheque to close the account.

Starting from Home page again choose Refunds & Credits, which will open up the Create Credit Memos/Refunds screen, and below the Menu Bar select the Use Credit To icon that has a hand over a green bill and choose Give Refund.

You will immediately get a Warning which states “This credit memo has no amount to be refunded. Would you like to create a refund cheque that is not directly linked to this credit memo? By saying Yes, QuickBooks now takes you to the Write Cheques screen where you will process a cheque in the amount of 67.20 to Hart Printing.

Starting from the top Bank Account field,  accept the default Royal Bank, tab to Date field and use March 18, 2011, choose Hart Printing for Pay to the Order of, tab to the $ field and key in 67.20, tab through to the Memo field and key in Agreement cancelled – overpayment on account.

We will then Tab to the Account field and from the drop-down box choose Consulting On Site as the account we want to reduce. Tab to the Tax field and choose H, tab through to the Class field and choose Printers from the drop-down box and Save & Close.

If you now go back to the Customer Centre, click on Hart Printing you will see this refund has had no effect on the balance but does show up as Cheque in the type column as a -76.20 Amount. If you highlight that  entry, double click on it, it will take you back to the Write Cheques screen.

To see the accounting entry that QuickBooks has made press Control and Yand this will bring the Transaction Journal to your screen. You will notice that the RBC bank was credited with 67.20, the Consulting On Site account debited with 60.00 and the GST/HST Payable also debited with 7.20. That is why the Accounts Receivable Customer account of Hart Printing was not impacted.

Continuing on with this series I will deal with NSF cheques and Bad Debts next.

Remember that you can follow me on Twitter @twitter.com/QuikBooksTrainr for tips and updates also.

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