Enter Vendor Credits and Refunds in QuickBooks^® Online

Did you receive a refund for a business expense? Vendor credits and refunds are essential in business transactions, representing reimbursements or adjustments from vendors for various reasons like returned items or overpayments. Tracking these accurately is vital for financial integrity. 

QuickBooks Online offers a simple solution for tracking and applying these transactions to your accounts payable. Whether you’re returning goods or getting credits for overpayments, understanding how to enter vendor credits and refunds in QuickBooks Online helps you stay on top of your financial obligations, prevent overpayments, and build better vendor relations.

This article will focus on how to enter vendor credits and refunds in QuickBooks Online.

What are Vendor Credits and Refunds in QuickBooks Online?

Vendor credits and refunds in QuickBooks Online refer to transactions involving money owed to you by a vendor or supplier. Vendor credits typically occur when a vendor issues you credit for returned goods or overpayments, while refunds involve receiving money back from a vendor for returned items or services not rendered. In QuickBooks Online, managing vendor credits and refunds involves recording these transactions accurately to keep track of the money owed to you or returned to you by your vendors, ensuring your accounts payable are up to date and your financial records are accurate.

Refunds from vendors in QuickBooks can occur for various reasons. In the course of running your business, you’ll make payments for various supplies and carry on with your operations. However, there might be instances where a payment needs to be refunded due to reasons such as price adjustments or unexpected discounts. It’s important to avoid the mistake of recording the refund against the original bill expense.

Steps to Enter Vendor Credits and Refunds in QuickBooks Online

Below are the steps to begin entering vendor credits and refunds in QuickBooks Online:

1. When you Enter Expenses or Write Checks

If you’re not using bills to monitor expenses, follow these steps:

1. Ensure you’ve previously recorded the initial expense or check in QuickBooks and allocated a Category/Account to it.
2. Click on + New and then Bank Deposit.
3. Proceed to the Add funds to this deposit section:
   • Input the refunded amount from the vendor and designate the same Category/Account used for the initial expense or check.
   • If the refund is tied to an expense associated with a customer or project, mark theTrack returns for customer box and select the relevant customer or project. 
4. If you deposited customer invoice payments into the bank account in addition to the vendor refund, enter them in the Select the payments included in this deposit area.

2. If you Enter Bills you Plan to Pay Later

Follow these steps if you record bills to monitor your expenses. This confirms that the credit is properly allocated to the expense account associated with the vendor.

Step 1: Creating a Vendor Credit

1. Click on + New.
2. Select Vendor credit.
3. From the Vendor ▼ dropdown menu, choose your vendor.
4. Given your method of recording purchases with this vendor input the Category details or Item details. Usually, this refers to the category, product, or service for which you’re receiving a credit.
   
   Note: Opting for an inventory item will prompt QuickBooks to return it to inventory. If the item is defective or not intended for re-entry into inventory, you can perform an inventory adjustment.
   
   
5. Click on Save and Close.

Step 2: Applying Vendor Credits to a Bill

You can allocate a vendor credit to any open or upcoming bill. When you’re ready to utilize the credit, here’s what to do:

1. Click on + New.
2. Select Pay bills.
3. Choose a bill for your vendor from the list. The available credit with this vendor will be displayed in the Credit Applied field.
4. Fill out the remaining fields as you normally would.

3. Record a Vendor Credit without any Associated Expenses

Occasionally, a vendor might offer you credit as a promotion or gesture of gratitude. Here’s how to document this credit and allocate it to any outstanding or upcoming bills with them.

Step 1: Record the Vendor Credit

This ensures that the credit is recorded in the expense account associated with this vendor.

1. Click on + New.
2. Choose Vendor credit.
3. From the Vendor dropdown menu, select your vendor.
4. Given your method of recording purchases with this vendor input the Category details or Item details. Typically, this will involve specifying the category, product, or service for which you’re receiving the credit.
5. Hit Save and close.

Step 2: Deposit the Received Funds from the Vendor

1. Click on + New.
2. Choose a Bank deposit.
3. From the Account dropdown menu, select the account where the refund was deposited.
4. In the “Add funds to this deposit” section, complete the following fields:
   • Received From: Select the vendor who issued the refund.
   • Account: Choose Accounts Payable.
     
     Note: Selecting Accounts Payable allows you to link the refund to the vendor credit. Although it may seem unconventional, this method is the most effective.
     
     
   • Payment method: Specify the method used by the vendor for the refund.
   • Amount: Enter the refund amount.
5. Choose Save and Close.

Step 3: Use Pay Bills to Link the Bank Deposit to the Vendor Credit

Although you’re not settling a bill, it’s necessary to follow this step to maintain accurate vendor expenses.

1. Click on + New.
2. Select Pay bills.
3. Choose the bank deposit you recently created. The Credit Applied field will display the amount of the vendor credit, and the Total payment should be $0.00.
4. Click on Save and close.

4. Document Vendor Refunds using a Credit Card

1. Click on + New.
2. Choose a Credit card credit.
3. In the Payee field, pick the correct vendor.
4. From the Bank/Credit account dropdown menu, choose the credit card that received the refund.
5. Fill in the Payment date, refund Amount, Tax, and Category.
   • Reminder: The category entered here should match the original expense account on the initial bill.
6. Finally, select Click Save and Close.

Conclusion

So, to sum it up, getting the hang of entering vendor credits and refunds in QuickBooks Online is important for keeping your financial records accurate and your business running smoothly. Follow the steps covered in this article and you’ll be able to manage the transactions. By efficiently tracking reimbursements and adjustments, you can ensure transparency in your financial transactions and manage your cash flow better. QuickBooks Online makes this task easier by providing user-friendly tools that make recording and using vendor credits and refunds straightforward. If you need any help, get in touch with QuickBooks Online Assistance at toll-free number: +1-888-245-6075.

Frequently Asked Questions