How to Handle Supplier Credits and Refunds

To handle supplier credits and refunds in QuickBooks Online, follow these steps. This process ensures your books accurately reflect the returned money and the reduction of what you owe the supplier.

Enter a supplier credit

Use this step when a supplier owes you money (e.g., for returned goods or a pricing adjustment).

1. Select the + New button.
2. Select Supplier credit.
3. In the Supplier field, select the supplier.
4. Enter the Credit date and the Credit amount.
5. In the Category details or Item details section, select the expense account or item used on the original bill. This ensures the credit reverses the original expense.
6. Select Save and close.

Enter a supplier refund cheque

If the supplier sends you a cheque to pay off the credit, record it as a deposit.

1. Select the + New button.
2. Select Bank deposit.
3. From the Account dropdown, select the bank account where you deposited the refund.
4. In the Add funds to this deposit section, fill in the following fields:
   • Received from: Select the supplier.
   • Account: Select Accounts Payable.
   • Payment method: (Optional) Select Cheque.
   • Ref no.: (Optional) Enter the cheque number.
   • Amount: Enter the refund amount.
5. Select Save and close.

Link the refund to the supplier credit

Finally, connect the deposit (refund) to the supplier credit to clear the balance.

1. Go to the Settings (gear icon) and select Pay bills.
2. In the Filter dropdown, select the specific Supplier.
3. Select the bill credit and the deposit (cheque) you just entered. They should appear in the list.
4. Verify the total in the Credit Applied column matches.
5. Select Save and then Done.