When a customer pays more than the total of their open invoices, the extra funds remain on the payment as an unapplied balance. If the customer wants that money returned rather than held as a credit, you can issue a refund directly from the payment. This guide covers that process from start to finish.
If you are issuing a refund from a credit memo instead, see How to Issue a Refund from a Credit Memo.
Steps
1. Go to Receivables. Click Receivables in the left sidebar.
2. Locate the payment with the overpayment. You can find it two ways:
Click the All Open Balance Payments tab to see all payments with unapplied funds across all customers
Go to Payments by Account, find the customer, and open their payment history directly
3. Open the payment. Click on the payment row to open the Payment Distribution screen. Confirm that an amber notice is visible below the payment summary card — this indicates unapplied funds are present and shows the exact amount.
📸 Screenshot suggestion: The Payment Distribution screen showing the amber unapplied funds callout with the dollar amount and the Issue Refund and Apply remaining buttons.
4. Click Issue Refund. Click the Issue Refund button in the amber callout. The Issue Refund modal opens. The customer name, source (Payment), and unapplied amount are pre-filled automatically.
5. Review and complete the refund details.
Confirm or update the following fields:
Method — Defaults to the original payment method. Update this if the refund is being issued by a different method
On — The date of the refund
Chk Num — Enter the check number if issuing by check
Mailed On — The date the check was or will be mailed to the customer
Comments — Any notes about the refund
📸 Screenshot suggestion: The Issue Refund modal with the Customer, Method, On, and Amount fields visible and pre-filled from the source payment.
6. Add refund items (optional). Use the Add Item button in the Refund Items table to document what the refund covers at the line-item level. Enter a description, quantity, and unit price — the Item Total calculates automatically and updates the Amount field above.
⚠️ Warning: If the Amount field and the Refund Items total do not match when you submit, the system will ask you which figure to use before creating the refund. Have a clear answer ready — typically the Amount field is correct when coming from an overpayment.
7. Click Issue Refund. Click the Issue Refund button at the bottom of the modal. The refund is created with a status of Issued and you are taken to the Refunds tab where the new record is visible.
After Issuing
The refund will appear in the Refunds register with status Issued. The Pending Refunds count on the Receivables KPI bar will increase by one. When the check clears the bank, mark it as cleared — see How to Mark a Refund as Cleared.