Vendor Refund Processing

The Vendor Refund procedure is used to record a cash, check, or other refund payment from one of your vendors.  The vendor refund procedure allows you to apply the amount received from the vendor to one or more open, negative accounts payable invoices for the Vendor. 

The Vendor Refund procedure

•      Updates the cash account that the vendor payment is deposited into

•      Creates a Bank record to record the payment.  The Bank record is used during the Bank Reconciliation process.

•      Adjusts the open accounts payable invoice balance(s) for the vendor to reflect the amount received.

To process a vendor refund, you should complete the following tasks.

•      Verify that you have a  Vendor Refund Clearing account set up in the General Ledger System.  The Vendor Refund Clearing account (which should normally have a zero balance) is used only when applying cash received from a vendor against the AP invoices for the vendor. Set up the account if it does not already exist.

•      Use the Bank Management program to record the cash, check or other payment received from the vendor.  A debit for the amount of the refund check should be posted to the appropriate cash account, and a credit for the same amount should be posted to the Vendor Refund Clearing account mentioned in the prior step.  The Bank Management program will also allow you to record an image of the vendor refund payment (if a paper check is received from the vendor), while you are processing the deposit.

•      Use the AP Invoice Entry program to create a positive AP invoice for the amount of the refund check using the vendor that the check was received from.   Apply the invoice amount to the refund clearing account (this will have the effect of crediting the accounts payable account and debiting the refund clearing account).  Once this step is completed, the net vendor open AP balance should be correct, and the refund clearing account balance should be 0.  Note: You should use a non-taxable AP tax code for this “refund” invoice to make sure that the system does not calculate sales tax or vat.

•      Use the Apply AP Credit Memo program to apply the invoice created in step 3 to the credit memo that the refund was issued for.  This step closes the invoices and completes the process.


Verifying that an invoice was posted properly