This article shows you how to process refunds for customer and vendor transactions, including credit notes, payments on account, and imported bank transactions.

 Sage Accounting supports three refund methods:

• From Banking
• From a sales invoice
• From imported bank transactions

Record refunds from Banking

Use this option only to refund a payment on account or a credit note in full. You can't process a partial refund with this method.

To record a vendor refund:

1. Go to Banking.
2. Select New, then Sales / Receipt.
3. Select Vendor Refund.

To record a customer refund:

1. Go to Banking.
2. Select New, then Expense / Payment.
3. Select Customer Refund.

Other Receipts and Other Payments

Use this method when a standard refund against a payment on account or credit note doesn’t apply.

To refund a purchase:

1. Go to Banking, New, Sales / Receipt, Other Receipt.
2. Enter the refund.

To refund a sale:

1. Go to Banking, New Entry, Payment, Other Payment.
2. Enter the refund.

Record a refund from a sales invoice

1. Open the invoice.
2. Select Payment.
3. Select Refund.

This option unallocates the payment from the invoice and records the refund in one step. You don't need to unallocate the payment first. This option isn't available for vendor bills.

Record refunds from imported bank transactions

Some Banking refund functions aren't available from the import window.

You can:

• Match and record a refund against a credit note for the full amount

You can’t:

• Record a refund directly against a payment on account

Instead:

1. Record the refund from Banking.
2. Match the imported transaction to the manually recorded refund.

Scenarios

Scenario 1: Merchandise return with a credit note

A customer fully paid an invoice for $500. They returned part of the merchandise and received a $150 credit note and refund.

1. Create an invoice for $500.
2. Record the $500 payment.
3. Create a standalone credit note for $150.
4. Record the $150 refund against the credit note using either Banking, New, Refund, or Bank Import, Match.

Scenario 2: Full refund of a payment on account

1. Record the payment on account.
2. Record the refund against the payment on account.

Scenario 3: Incorrect invoice replaced with a new invoice

You created Invoice A for $800 and fully paid it. You then cancelled Invoice A and replaced it with Invoice B for $500. You refunded the remaining $300.

1. Create Invoice A for $800.
2. Record the $800 payment.
3. Unallocate the payment from Invoice A and save it as an $800 payment on account.
4. Void Invoice A, or create a credit note to cancel it.
5. Create Invoice B for $500.
6. Allocate $500 to Invoice B from the contact record.
7. Leave $300 available for allocation.
8. Go to Manage, Account Allocation.
9. Record a refund of $300 against the remaining payment on account.

Scenario 4: Vendor refund exceeds the expected amount

You can refund only the exact amount of the original transaction or credit note. When a vendor sends more than the expected refund, record two separate transactions.

1. Record the expected refund against the original payment on account using Banking, New, Refund.
2. Record the overpayment using one of these options:
   • Create a standalone credit note and record the refund against it
   • Record the overpayment as an Other Receipt for a purchase