Refund Processed - Next step?

TPATPA Member Posts: 7

Morning,
we have been using Wave seamlessly without too much of a hassle.

Please can someone advise us, whats next once a refund has been issued.

Example
1. We invoice the client for $10. They will pay us $1/month over 10 months.
2. Client pays $1 monthly for 5 months ($5)
3. Client cancels in month 6. We retain $1 as a cancellation fee and refund the client $4.
4. We execute the refund payment, less our cancellation fee. At this point the invoice shows an amount due.(after all they didn't complete the full payment of $10)

What would be the next step in terms of said invoice?
Thank you for your input.

Regards
Tim

edited December 7, 2018 in Sales & Invoicing

Comments

  • SamdSamd Administrator Posts: 358 admin

    Morning @TPA , that's an excellent question.

    In this case, you'll want to write off the remainder of the invoice to close it out.
    1) Head over to Accounting > Chart of Accounts, and create an Undeposited Funds Account (Bank or Cash Account) and a Bad Debt Account (Operating Expense account)
    2) Next go to Accounting > Transactions, and generate a new income transaction for the remaining $4 in this case. The account should be Undeposited Funds, and you should have the category as 'Payment made to an Invoice in Wave > Invoice #x"
    3) Still on Accounting > Transactions, click on Add Expense. Here we will want to add the description (bad debt on Invoice #), Account (Undeposited Funds), total amount ($4) and mark this as a Withdrawal. Categorize the Expense as Bad Debt.

    This'll balance everything out and you'll be able to track how much you've written off due to refunds. The 'bad debt' terminology makes it seem worse than it is as well.

    I've also attached an article here that goes over the process a little more in-depth: https://support.waveapps.com/hc/en-us/articles/115000031243-Dealing-with-bad-debt-How-to-write-off-an-invoice

  • TPATPA Member Posts: 7

    Thanks @Samd , really appreciate the feedback.

  • TPATPA Member Posts: 7

    Just to clarify @Samd after we pay the refund of $4, keep $1 as our cancellation fee, the invoice shows $5 as outstanding. Do we follow the same methodology described?

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