How to Refund an Invoice With a Deposit

To give a refund for an invoice that already has a deposit recorded, you need to create a credit memo for the full amount and then process the refund to return the money to the customer.

Step 1: Create a credit memo

The credit memo reverses the sale, including the sales tax and the deposit amount.

1. Select + New.
2. Select Credit memo.
3. Select the Customer.
4. Enter the Credit memo date.
5. In the Product/Service section, select the item(s) from the original invoice.
6. Enter the Qty, Rate, and Tax exactly as they appear on the original invoice. The total should match the full balance of the invoice, including the deposit.
7. Select Save and close.

Step 2: Process the refund

How you process the refund depends on how the original payment was received.

If the deposit was paid by cash, check, or bank transfer:

1. Select + New.
2. Select Refund receipt.
3. Select the Customer.
4. In the Deposit to field, select the bank account where the funds are coming from.
5. In the Product/Service section, select the same item(s) used on the credit memo.
6. Enter the Amount you are refunding (usually the full amount).
7. Select Save and close.

If the deposit was paid by credit card (using QuickBooks Payments):

1. Select + New.
2. Select Refund receipt.
3. Select the Customer.
4. In the Payment method field, select Credit card.
5. Select the correct Process credit card refund option.
6. Enter the Amount to be refunded.
7. Enter the remaining details and select Save and close to process the refund through the merchant service.

Step 3: Link the credit memo and the refund

This step clears the open credit from the credit memo and links it to the refund.

1. Select + New.
2. Select Receive payment (or Bank deposit if you are using that workflow).
3. Select the Customer.
4. You will see the Credit memo in the Outstanding Transactions list. Check the box for the credit memo.
5. You will see the Refund receipt (or check) listed. Check the box for the refund.
6. Ensure the Total credits equals the refund amount.
7. Select Save and close.