How to Log Chargebacks and Refunds
It’s important to have good accounting records for your business. Tracking refunds is important so that you can see the impact of refunds on your business and track individual customer refunds appropriately.
In this episode, Bernard Roesch explains how to track refunds appropriately within QuickBooks.
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Why Track Refunds in QuickBooks?
As a business, you need to ensure that a customer gets refunded and that you don’t owe them money. This ensures that your customers are satisfied and that you are not left blind to whether you have paid refunds or not. It’s also important to watch the trends of returns in your business because this could affect the profitability of your business over time. For these reasons, it’s important to track refunds carefully within QuickBooks.
How to Log a Refund in QuickBooks
A sale that needs to be refunded will already be logged within QuickBooks. This will be logged as either an invoice or a sales receipt for the customer. You will have already received money for this sale in most cases, so the accounts receivable for this customer should be zero. In order to give money back to the customer, a few steps should be taken.
The first step is to issue a credit memo on the customer record that shows that you owe the customer money for a sales item, called returns. Tracking returns as a separate sales item is helpful for reporting purposes at a later time. Once you’ve issued the credit memo, you write a check to the customer against that credit memo. This zeroes out the credit memo that you owe the customer, and the customer receives their money. The specific process for you to execute refunds in your business may vary depending on how you sell and return product or services, but the basic process above should be followed.
Need Help Tracking Refunds in QuickBooks?
If you need help configuring QuickBooks and your accounting workflow to track refunds appropriately, contact Bernard today. It’s important to track these in a best practice way as this is important accounting information to be able to look back on later.