The steps to process a credit card refund on an invoice payment depends on when the original transaction was processed. If the refund occurs in the same business day (3pm PST is the settlement cut off time and anything after that is then considered next business day) as the original transaction, simply void the invoice payment or the sales receipt. If the refund occurs on the next business day (or later) you must use the Refund option.
Note: If you are refunding a card because the same payment was processed twice by mistake, there may be additional steps required. Instead of following the steps below, go to article A customer's credit card was processed twice by mistake - how do I correct this? and follow the steps there.
To refund the credit card:
- Click the Create (+) icon and choose Refund Receipt.
- Select the customer you want to refund.
- In the table, enter information about the original sale for which you want to issue the refund.
- Enter the amount you want to refund.
- From the Payment method drop-down list, select the credit card used for the original payment.
- Click Save
- In the Credit Card Transaction Status window, click Print if desired.
- Click Close
You should not delete a credit card transaction that has already been processed through your merchant account. To reverse a processed amount, you can click payment has been processed and click Void Payment (or Void Refund, as appropriate). But if it has already settled, the only way to reverse the amount is to create an offsetting refund receipt (if this is a payment), or an offsetting sales receipt (if this is a refund).
There may be instances after correctly completing the refund, where you find there is no balance in Accounts Receivable (AR) for this customer; or in a special situation where the customer opts to use one credit card for a down payment or the entire purchase is paid by Sales Receipt and then requests to use a different credit card or another form of payment for the down payment or purchase at a later date. In this case, you need to issue a refund receipt and a journal entry. The refund receipt will place the funds back to the customer’s card. The journal entry places a balance back to AR to account for the refunded down payment.
Creating the Journal Entry:
- Click the Plus (+) icon> Journal Entry.
- Input the following:
- Line 1: Account: Accounts Receivable, Under Debit enter the amount refunded and enter the customer's name in the Name column.
- Line 2: Account: Income, select the account that was used in the Product/Service item that was used on the Refund Receipt, Under credit enter the amount of the transaction.
- Click Save.
Make sure to document the journal entry by referring to the credit card refund.
This Journal Entry is required because the Refund Receipt enters a Credit Memo when the Refund is processed.