[AR] Refund a Customer that Overpaid an Invoice

When a customer overpays an invoice, there are three ways to handle it:

1. Refund the Customer

2. Apply the Overpayment to Future Invoices (‘On Account’)

3. Use a Dummy Invoice for Small Overages

Option 1: Refund the Customer via AR & AP

1. AR Cash Receipts:

   • Go to AR > Programs > AR Cash Receipts and create a batch in an open month.

   • Enter customer, transaction date, check #, deposit #, and check amount (total paid minus refund).

   • Click the blue chevron. In Initialize Invoice, select invoices to apply payment or choose Don’t Initialize.

   • Use Miscellaneous Receipts to post the refund portion to a suspense/clearing GL account.

2. Process AR Batch:

   • File > Process Batch, Validate, and Post.

3. AP Transaction Entry:

   • Set up the customer as a vendor (if not already).

   • Create an AP invoice for the refund using the same clearing/suspense GL account.

   • Process AP batch and issue a check to refund the customer.

Option 2: Apply Overpayment to Future Invoices (‘On Account’)

1. Go to AR Cash Receipts, create a batch, and enter the full check amount.

2. Enter check # and deposit #. Click the chevron to save.

3. Close the AR Initialize Receipt window and enter amounts applied to invoices.

4. Click On Account and enter the overpayment amount.

5. Process, validate, preview, and post the batch.

6. The overpayment remains as a credit for future invoices.

Option 3: Use a Dummy Invoice for Small Overages

1. If you do not want to refund or put the overage ‘On Account’:

   • Create a dummy AR invoice for the overage (e.g., $0.03).

   • Enter the full check in AR Cash Receipts and apply to both the true invoice and dummy invoice.

   • Alternatively, combine Option 2 and a dummy invoice to handle very small amounts.