Supplier refunds

If a supplier provides you with a refund, for example, because you returned faulty goods after you paid for them or they sent you a refund for a credit note, to ensure your account balances are correct, you need to record this refund in Accounting.

You can post a refund against a stand-alone credit note or a payment on account. If you need to refund a credit note or payment which has been allocated to an invoice, you have two options. You can:

  • Create a stand-alone credit note then refund it. The credit note reverses the purchase recorded by the original invoice and the refund reverses the payment.
  • Unallocate the original invoice and supplier payment or credit note so that the invoice is outstanding and the payment becomes a payment on account, or the credit note a stand-alone credit note. You can then record a refund against the credit note or payment on account. You should only choose this option if you intend to make another payment to the supplier for the same invoice at a later date.

If you’re on the Standard VAT Accounting Scheme, the credit note is picked up on the next VAT return. If you’re on the VAT Cash Accounting Scheme, the refund is picked up on the next VAT return.

To post a supplier refund from the Banking area

If you’re refunding a payment on account, you must use this option.

  • 1. Go to Banking, then click the relevant bank account.
  • 2. Click New then Sale / Receipt.
  • 3. Click the Supplier Refund tab, then complete the following information:
Supplier *  Enter either the company name or reference. As you start to type the list of suppliers appears, choose the relevant supplier.
Paid into Bank Account * Check the correct bank account appears. If you need to change this, choose the correct account from the drop-down list.
Method * Click the required payment method.
Date Refunded * Enter the date of the refund.
Reference (optional) If required, enter a reference for this receipt.
Amount Refunded * Enter the total amount of the refund.
Balance Owed The total outstanding balance is displayed here.
Bank Balance The current bank balance for the selected bank account is displayed here.
Tick If Cheque If the supplier gave you a cheque for the refund, select this check box.


Note: This option is only available if the account you chose is a cash in hand account.

* These details are compulsory.

By default, all outstanding credit notes and payments on account appear. To view all credit notes and payments on account, from the Display drop-down list, click All.

  • 4. Select the check box next to the credit note or payment on account that the supplier has refunded.

You can’t refund part of a payment on account or credit note. If you need to refund part of a transaction, you must first ensure you allocate the necessary amount of the payment on account or credit note to the relevant invoice, then refund the remaining outstanding value.

  • 5. Click Save or, to add another payment, click the Save arrow then Add Another and repeat from step 2.

You’ve now recorded the refund and the bank and supplier balances are adjusted accordingly.

To post a supplier refund from within a credit note

If the supplier has refunded part of the credit note, for example, because they’ve used part of it to pay an invoice, you need to allocate the relevant amount of the credit against the invoice before you record the refund for the outstanding balance.

  • 1. Go to Purchases then click Purchase Credit Notes.
  • 2. Click the relevant credit note.
  • 3. Click Record Refund, then check or enter the following information:
Amount Received * This is the total value of the credit note and you can’t amend this.
Paid into Bank Account * Choose the bank account used for the refund.
Method * Click the required payment method.
Date Refunded * Enter the date of the refund.
Reference (optional) If required, enter a reference.
Tick If Cheque If the supplier gave you a cheque for the refund, select this check box.

Note: This option is only available if the account you chose is a cash in hand account.

* These details are compulsory.

  • 4. Click Save.

You’ve successfully refunded the credit note which now shows as paid.