A refund from a supplier is a sum of money which is returned to you, For example because you have paid too much or because you have returned goods to your supplier.
A refund to your customer is a sum of money which you return to your customer. For example, because they have paid too much or because they have returned goods to you.
If you agree to pay or receive the sum of money rather than reduce the supplier or customer balance, the money for the refund will appear in your bank..
How do we reconcile this transaction in Xero?
You can only process a customer or supplier refund after you’ve created the credit note, overpayment or prepayment transaction that it relates to.
Record a refund
Enter the refund details on the credit note, overpayment or prepayment transaction. This creates a refund transaction to reconcile to the bank statement line for the refund payment.
To record the refund:
- In the Business menu, select Invoices or Bills to Pay.
- Select the Awaiting Payment tab.
- Open the credit transaction to refund.
- In the cash refund section, complete the payment fields.
- Click Add Refund.
If you process a full refund, the status of the transaction changes to Paid. If you only partially refund the transaction, it stays as Awaiting Payment.
Reconcile a refund
Once the refund is paid from or received in your bank account, reconcile the refund transaction with the bank statement line.
To reconcile the refund:
- In the Accounting menu, select Bank accounts.
- On the relevant bank account, click Reconcile [number of items].
- Next to the bank statement line for the refund payment, click Find & Match.
- Select the checkbox next to the refund transaction.
- Click Reconcile.
If you need help with this, or with other advice, then please get in touch with our accounting team.