Click here for the steps in doing a refund for a credit card or ACH payment.
This article will go over why you may need to keep the credit and some scenarios of when you may not need to credit.
Refund with a Credit
When you refund someone for something, it depends on whether or not they still owe what they were refunded for. If the customer doesn't owe anything, they will usually need the refund credit.
When a refund is created, the refund process automatically adds a credit. The box beside "Refund payment and close invoice with a credit" is automatically checked.
The original charge from the invoice stays in place for historical purposes, and the money is refunded to the customer. Instead of deleting the original charge, the credit offsets the charge to make a zero balance. (The credit replaces the payment, which was refunded). Instead of the balance being zero due to payment, it’s zero due to the credit).
For example, you have a customer who enrolled in a class and they withdraw from the Class.
The Class cost $200
The Customer paid $200
The account balance is $0
The Refund is $200, adding the $200 payment back for a balance of $200
The Credit is $200, which cancels the original charge
The account balance is $0
If your company has a cancellation fee, see the Note below.
Important Notes about Adding a Credit with a Cancellation Fee
Important Notes about Adding a Credit with a Cancellation Fee
The system will automatically enter the Credit equal to the refund. If you charge a cancellation fee, the Credit will need to be EDITED after the refund is posted to be one of the following:
If it's a FULL Refund (minus the cancellation fee), the Credit will INCLUDE the amount of the cancellation fee to balance out the account.
For example, if the total payment is $100 and the cancellation fee is $10, the full Refund is $90. The Credit should be $100 (the full Refund of $90 plus the $10 cancellation fee).
If it's a PARTIAL Refund (minus the cancellation fee), the Credit will INCLUDE the amount of the cancellation fee to balance out the account.
For example, if the total payment is $100, the cancellation fee is $10, but the partial Refund is half ($50), you would subtract the cancellation fee from the partial Refund to equal $40 refunded. The Credit should be $50 (the partial Refund of $40 plus the $10 cancellation fee).
Refund with No Credit
If you don't need a credit to offset the balance, then check the "Refund payment and leave invoice open." This is typically used if someone paid with the wrong payment method and they are planning to pay the Invoice again.
Just a flat refund with no credit is to just give money back (not cancel the charges).
The charge still exists and still needs to be paid for.
For example, say a customer enrolls for a Class that costs $100. They paid $100 at enrollment, but then logged into their account and accidentally paid another $100. The original charge for the Class was paid for and needed to be paid for. But the extra $100 needs to be refunded. So this would look like this:
The Class cost $100
The Customer paid $200
The account balance is $100 in the positive
The Refund is $100, adding the $100 payment back
The account balance is $0
In this case, the credit is not needed, as there were no charges that needed to be canceled (zeroed out).