Learn how to properly record and track credits or refunds issued to you by your supplier or vendor in QuickBooks Online.
If you’re new to retail or selling online, then you’ll eventually encounter a situation where you’ll have to handle a supplier credit or refund.
Just ignoring the refund or simply creating a deposit isn’t good practice since that doesn’t accurately track why you received that money.
By tracking supplier refunds, you’ll not only have a better idea of where your money is coming from, but also potential issues from your suppliers. These issues can mean anything from poor quality control to incorrect shipments.
Creating a vendor credit
The first thing you’ll want to do is create a vendor credit form. Select Vendor Credit from the Quick Create Plus (+) icon.
You’ll want to select the vendor, enter the correct date, and select the account and refund amount on the form.
You may also want to enter a description and memo as a reminder should you need a reference later on. It’s also helpful when you run reports or search later on.
The next step depends on whether you’ve been issued a refund or credit that you can apply toward future purchases.
Creating a bank deposit and linking it to the vendor credit
Once you’ve saved the vendor credit, you’ll want to create a bank deposit for the refund amount if you’ve been issued a refund.
Go to the Quick Create Plus (+) icon and select Bank Deposit.
Select the bank account and confirm the date is correct.
Make sure you select the correct vendor from the “Received From” column and the Accounts Payable (A/P) account.
Enter the correct amount. While the Description and Memo fields aren’t necessary, you’ll want to leave yourself some note so that you’ll know what the transaction is for when you run reports.
These notes also help when you’re searching for documents.
Save and close.
Now we have the vendor credit form and the bank deposit, but they’re not linked.
The last step in this process is to create a check to link the two transactions.
To do this, we’ll create a check.
Click on the Plus (+) icon and select Check.
On the Check document, select the Vendor from the dropdown menu and the bank account you’ve selected for the refund.
Once you select the vendor, QuickBooks Online will show both the bank deposit and the vendor credit on the right window. Click on the Deposit and then the Vendor Credit.
If you have multiple transactions there, make sure the amounts are the same and that you’re linking the correct transaction documents.
The total amount should be $0.00 since we’re just linking the transactions.
Note: if you get a “You must select a bill before adding a credit” window, then you’ll need to click on the Deposit first.
Save the transaction.
That’s it! You’ve created a vendor credit, a bank deposit, and you’ve linked the two transactions to process a refund from your supplier.
Applying the vendor credit to a new bill
Sometimes, suppliers will give you a credit toward your next purchase instead of a refund.
Common reasons for credits include defective or damaged inventory that you can send back or destroy for credit toward future bills.
The first step is to create a vendor credit. Refer to the instructions above for how to do this.
Once you have the vendor credit document, you’ll see a negative balance for your vendor. In the image below, we have a $40 vendor credit balance.
The next time you go to pay a bill, this credit is applied to that transaction.
If not, you’ll want to confirm that you’ve selected the correct vendor. A window will show up and you can apply the credit to the document. Below is an example of a bill for $100.
When you click on Make payment, QuickBooks Online will automatically apply the credit to the bill. Confirm that the credit has been applied. You’ll see it below.
If not, you’ll have the option to select the vendor credit to apply to the bill. If the credit doesn’t appear, then make sure you’ve selected the correct vendor and that the dates are correct.
Note: if you get a “You must select a bill before adding a credit” window, then you’ll need to click on the Bill first.
Once you save, you’ll see the bill payment with the applied credit and the remaining balance.
Credits can only be applied to open bills. If you’re getting errors like the credits not showing up for your bill payments, make sure to check the dates on the documents and make sure you’ve selected the correct vendor.
Linking vendor transactions is important in QuickBooks Online.
Unlinked transactions lead to large open balances on your vendors that can interrupt or confuse employees when they go to create and pay bills.
This will also give you incorrect figures when you run reports that include your vendors.
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