Refunds

Xero help on refunds is as follows:

https://central.xero.com/s/global-search/%40uri#q=refunds

Refund to a donor

Refund relating to an unpaid invoice

If the invoice has not gone out to the donor and just needs its value changing, then edit the invoice to do that.

If the invoice has gone out to the donor, then you need to create a related credit note and the donor will in due course pay the reduced amount. No cash refund to the donor is needed.

Related video: https://tv.xero.com/detail/video/5256362312001/creating-a-sales-credit-note-in-xero

The procedure creates a credit note, automatically filling in the details of the original invoice.

Bring up the invoice from the Awaiting payment tab and click Add Credit Note in the Invoice Options on the right:

This will create a credit note for the full amount of the original invoice. Approve as is, if appropriate. Otherwise change the total at top right to the credit value and edit the line items (entering credit value(s) in the unit price column to match that total. Then Approve.

The original invoice will then show the credit against it.

Refund relating to a paid invoice

If you need to create a credit note to send to the customer then follow the procedure described here for creating a new credit note. Otherwise (i.e. if you don’t need to issue a credit note) then do as described on the next section, “Refund of cash received where there was no invoice”.

From the top menu go to Business: Invoices, and select New Credit Note.

Then enter Customer Name, Date, Reference at top left. For one or more item lines enter Description (explaining the refund), Qty =1, Unit Price = value, VAT as appropriate, and relevant expenditure accounting code. Also, assuming relevant, Donor/Project and Funding Type. Then Approve or Save and Submit for approval.

Once approved, if there are any unpaid bills for the supplier – see further below if there are none -, the approver will then be prompted to either allocate the credit to one or more bills or to record it as a cash refund. Enter the value to be set against another bill or – if a cash refund – click “Cash Refund”.

The shot below shows entering cash refund. Under “Paid From” you need to select the bank account the money was paid out of.

Then click “Allocate Credit”.

If there are no invoices to yet to be paid by the donor, then a “Make a cash refund” panel appears at the bottom of the credit note, with fields to be filled.

Choose the right bank account from the “Paid from” drop down, complete the other fields and select Add Refund.

In the case of a cash refund, you then need to reconcile the related bank transaction with the credit note. Hopefully the match will be found automatically. If not, click “Find and Match” and the credit note should be among those listed.

Refund of cash received where there was no invoice

When reconciling the money paid out of the bank account, enter it as if it were income of the same type as the item originally received (and overpaid). For example:

On the Xero item match panel, select Add details or View details:

Enter the donor name in the “To” box and explain the credit in the description cell. Then choose the Revenue code for the original payment and Save Transaction. Then “Reconcile”. If the credit is crediting more than one revenue type, enter a line for each, splitting the total income appropriately.

Also remember to code for Donor/Project and Funding type.

The money paid out will thus reduce the total income shown in the accounts for the related items.

Refund received from a supplier

Refund relating to an unpaid bill

See video: https://tv.xero.com/detail/video/5127759514001/supplier-credit-notes-in-xero

In this case you will NOT have received cash back from the supplier. The refund is reducing the amount to be paid on the original bill.

The procedure creates a credit note, automatically filling in the details of the original bill.

Bring up the bill from the Bills to Pay tab and click Add Credit Note in the Bill Options on the right:

This will create a credit note for the full amount of the original bill. Approve as is, if appropriate. Otherwise change the total at top right to the credit value and edit the line items (entering credit value(s) in the unit price column to match that total). Then Approve:

The original bill will then show the credit against it:

In due course, you will be paying the new net amount owed on the bill.

Refund relating to a paid bill

See video: https://tv.xero.com/detail/video/5127759514001/supplier-credit-notes-in-xero

Use this procedure if it is a non-cash refund to be set against a future bill yet to be paid. (If necessary, enter such bill first, if you have it.)

If you have a cash refund, then you can either use this process or the procedure below for “Refunds where no bill was entered in the system”. The latter is simpler and recommended.

From the top menu go to Business: Bills to Pay, and select New Credit Note.

Then enter Customer Name, Date, Reference at top left and Total value at top right. For one or more item lines Enter Description (explaining the refund), Qty =1, Unit Price = value, VAT as appropriate, and relevant expenditure accounting code. Also, if relevant, Donor/Project and Funding Type. Then Approve or Save and Submit for approval.

Once approved, if there are any unpaid bills for the supplier – see further below if there are none -, the approver will then be prompted to either allocate the credit to one or more bills or to record it as a cash refund. Enter the value to be set against another bill or – if a cash refund – click “Cash Refund”.

If the Credit Note had not been approved immediately but saved for later approval (e.g. via the “Awaiting approval” tab from the “Bills to Pay” page), then the allocation view above is accessed via clicking on the “Allocate Credit” option on the drop down for “Credit Note Options” at the top right of the credit note:

The shot below shows entering cash refund. Under “Paid to” you need to select the bank account the money was paid into.

Then click “Allocate Credit”.

If there are no bills to yet to be paid to the supplier, then a “Receive a cash refund” panel appears at the bottom of the credit note, with fields to be filled.

Choose the right bank account from the “Paid to” drop down, complete the other fields and select Add Refund.

In the case of a cash refund, you then need to reconcile the related bank transaction with the credit note. Hopefully the match will be found automatically. If not, click “Find and Match” and the credit note should be among those listed.

Refund where no bill was entered on the system

When reconciling the money paid into the bank account, enter it as if it were an expense of the same type as the item originally supplied (and overpaid). For example:

On the Xero item match box, select Add details or View details (alternatively “Find & Match” then “New Transaction”):

Enter the supplier name in the “From” box and explain the credit in the description cell. Then choose the expense code for the original payment and Save Transaction. Then “Reconcile”. If the credit is crediting more than one expense type, enter a line for each, splitting the total cost appropriately.

Also remember to code for Donor/Project and Funding type if appropriate.

The money coming in will thus reduce the total expense shown in the accounts for the related items.