I have been asked a number of times if QuickBooks Online can handle vendor refunds. But the truth is that there is no such transaction in the software. There’s the wrong approach, where some people have tried to add the vendor refund to their bank deposit, such as in this screenshot:
There are two problems with this approach. First, the deposit does not appear in the transactions related to that vendor:
Second, the deposit screen cannot handle product and service items, only accounts on the general ledger. This is useless if, for example, the original paid bill contained inventory items that must be removed from inventory. And even if inventory is not an issue, the deposit screen also has no room for tax or a customer/project.
And so, I employ the following workflow: The MacGyver-esque Approach
First, I create a vendor credit. This debits Accounts Payable (leading to a negative balance) and credits (reduces) Inventory:
Second, on the same day, I create a Deposit into the Bank, debiting the Bank and crediting Accounts Payable:
The Unpaid Bills report indicates the negative amount from the vendor credit and the positive amount from the deposit, adding up to zero:
Finally, I can apply these to each other by choosing Pay Bills, where I check off the name of the vendor and QBO immediately offers to apply the pre-existing credit, so there is no actual payment:
Now the Unpaid Bills report does not have that vendor listed at all:
And there is no $0 transaction coming out of the bank, as QBO knows it is just applying the credit:
In the end, here is what we see as far as the vendor transactions are concerned. The deposit does appear this time, in relation to the temporary vendor credit we created, along with the receive payment transaction that applied the credit to the deposit:
So yes, this workaround does require a couple of extra steps, but they take almost no time. And this workflow makes use of the capabilities of QuickBooks Online to track all transactions having to do with a particular vendor, as well as inventory levels, sales taxes paid and customer/project if applicable.
Esther Friedberg Karp is an internationally-renowned trainer, writer and speaker from Toronto, where she runs her QuickBooks consulting practice, EFK CompuBooks Inc. Consistently in Insightful Accountant's Top 100 ProAdvisors, she has been named to the Top 10 twice.
A ProAdvisor in three countries, she has traveled the world with Intuit, spoken at QuickBooks Connect in San Jose and Toronto, among other places, and has written countless articles for Intuit Global.
Esther has been named one of the “Top 50 Women in Accounting,” a “Top 10 Influencer” in the Canadian Bookkeeping World, and is a repeat nominee for the “RBC Canadian Women’s Entrepreneur Awards.” She counts among her clients many international companies, as well as accounting professionals seeking her out on behalf of their own clients for her expertise in multi-currency and various countries’ editions of QuickBooks Desktop and Online.
She can be reached at esther@e-compubooks.com or 416-410-0750.