Hello Expert QBO Users. I have invoiced a client of mine and they paid in advance for my services. I was not able to complete the service. How do I send them a refund?

Hey there, Scott.

You can create a credit memo to record a refund for an advance payment. Here’s how:

1. Click + Create and then select Credit Memo.
2. From the Customer dropdown, choose the client you are refunding.
3. Select the original Product/Service that was not completed.
4. Enter the amount you are refunding.
5. Click Save and close.

The next step is to record the refund:

1. Click + Create and then select Expense.
2. From the Payee dropdown, select your client.
3. Choose the Payment account (the bank account the refund came from).
4. In the Category field, select the Debtors account (Accounts receivable).          
5. Enter the refund amount as a positive number.
6. If you collect tax, select the appropriate Tax in the Tax field.
7. Click Save and close.

The last step is to link the credit memo and refund, as this clears the open balance on the customer's account:

1. Click + Create and select Receive Payment.
2. Select your client's name from the Customer dropdown.
3. You will see the Credit Memo you created and the Payment you just recorded. Check the box next to both of these transactions.
4. Make sure the amount in the Payment field at the top is $0.00.
5. Click Save and close.
6. If you have Online Banking, go to Accounting, then Bank transactions.
7. Match the record you find.

For more information, you can refer to the following articles:

• Record a customer refund in QuickBooks Online
• Create and apply credit memos or delayed credits in QuickBooks Online

I also recommend consulting your accountant for further assistance on accurate recordkeeping. If you don't have one, you can find a professional through the QuickBooks ProAdvisor page.

Feel free to let us know if you have additional questions. The Community space is available 24/7.