Learning QuickBooks Online | Focus on Bookkeeping
How To Handle Supplier Refunds and Credits

by L. Kenway BComm CPB Retired

Today I'll walk you through how to process a supplier refund and credit in QuickBooks®Online.

I don't know about you but every time I have to book a supplier refund or credit note in QuickBooks Online I have to stop and think about how to do it. It is not an intuitive or easy process. There are a few steps required to get the results you want.

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How To Process A Supplier Refund in QuickBooks® ONLINE

If you look at the green drop down menu for "New transaction", you will see "Supplier Credit" listed. So my first instinct is to always choose this so I can record credit.

The next thing I usually want to do is go to the Bank Deposit screen and enter the supplier refund that showed up on the bank statement and/or on the bank feed.

So far so good but then I noticed that when you go to the supplier ledger, QuickBooks Online does not automatically match the deposit to the supplier credit. 

If you thought that you need to do a bill payment, you would be correct. This is where the two transactions are offset and a zero entry payment is recorded.

Here are the steps in more detail:

Step One - Record the Supplier Credit

1. Go to the supplier you received the refund from.
2. Click on the green "New transaction" drop down menu and select "Supplier Credit".
3. Enter the details of the supplier refund making sure you attach any documents to support the transaction. Remember to select the same account that the original transaction was booked to in the "Accounts Detail" section of the screen.
4. Heads up - If you returned items to the supplier, use the "Items Detail" area of the screen not the "Account Details" section.
5. Another Heads up - Make sure you book your GST/HST/PST properly here. You will not be able to do this on the bank deposit screen.
6. Click on the green "Save and close" button at the bottom right hand side of the screen. If you don't see "Save and close", then you need to click on the down arrow to bring up the drop down menu.

There is always more than one way to do things in QuickBooks Online. You can also get the "Supplier Credit" by clicking on the "+" sign at the top right hand side of the screen. It is to the left of the gear and "?". 

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If you did NOT receive any money and the supplier credit will be applied against an existing invoice, proceed to step three (3). If you did receive funds back from the supplier, then proceed to step two (2).

Step Two - Record the Refund Received

If the supplier actually gave you a refund that has hit your bank account and/or credit card, do the following:

1. Click on the "+" sign at the top right hand side of the screen and select "Bank Deposit". The "+" sign is to the left of the gear and "?". 
   
2. Fill in the form. Select the bank or credit card account the supplier refund is sitting in. 
3. In the "Add funds to this deposit" area of the screen, do the following:

• Select the supplier's name under the column "Received From".
• Select Account Payable under the "Account" column.
• Add a good memo in the "description" column ... you'll thank me when you are in an audit four years down the road!
• Enter the value of the supplier refund under the "Amount" column.
• Leave the "Sales Tax" column blank as you dealt with the sales tax in Step One. If you didn't, go back and edit your supplier credit transaction.
• Attach any relevant documents to support the deposit ... again, you'll thank me when you are in an audit four years down the road!
• Click on the green "Save and close" button at the bottom right hand side of the screen. If you don't see "Save and close", then you need to click on the down arrow to bring up the drop down menu.

Step Three - Link the Credit to the Deposit

1. Click on the "+" sign at the top right hand side of the screen and select "Bill Payment" or "Expense". The "+" sign is to the left of the gear and "?". 
2. Select the Supplier's name who issued the supplier refund.
3. The software will automatically show you Outstanding Transactions AND Available Credits. If they don't show up in the form itself, there will likely be a list of possible transactions you can "add" on the right hand side of the screen. Add the applicable deposit and add the appropriate supplier credit if necessary.
4. If the software did not automatically match the Deposit to the Supplier Credit, match them manually.
5. Before you close, check your date and make sure it is the same date as the bank deposit.
6. Click on the green "Save and close" button at the bottom right hand side of the screen. If you don't see "Save and close", then you need to click on the down arrow to bring up the drop down menu.

Step Four - Check Your Results (Optional)

If you want to see if your entries worked, go the Supplier's ledger. You should see three entries:

1. Supplier Credit
2. Deposit
3. Bill Payment (or Expense)

If any of the three entries are not showing up in the Supplier's ledger you've made a mistake booking the supplier refund. Review the entry that didn't show up to see where you went off.

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