How to Refund a client invoice overpayment
KB Article #:
8913
Summary:
How to Refund a client invoice overpayment
Description:
Is there a way to issue a Refund for an Invoice that was paid?

Steps to Reproduce:
  1. Create an invoice on a project and Client paid that invoice.
  2. The client appeared to overpay the invoice so there is a negative balance on the Accounts Receivable ledger.
  3. Client needs to be refunded the overpayment. 
Note: Client does not want a credit.

Cause:
 
A project invoice is created and the invoice is paid. For whatever reason the client overpaid the invoice so there is a negative balance on the Accounts Receivable ledger. Client needs to be refunded the overpayment.
 
Important Note:
  • It is not recommended doing an Accounts Payable voucher to an Accounts Receivable or revenue account to pay the overpayment.
  • An Accounts Payable transaction to an Accounts Receivable or Revenue account would cause an Accounts Payable file reconciliation and would then have to be fixed.
Resolution:

The steps to resolve the overpayment are to move the overpayment from the Account Receivable to a holding account. Then enter an Accounts Payable payment or Accounts Payable disbursement to pay the client that will reference that holding account (as long as the client is set up as a vendor). If the Client is not set up as a vendor, the user can enter a Cash Disbursement to pay the Client the overpayment and reference the holding account.

Steps to clear the Accounts Receivable Balance off Accounts Receivable and move to a holding\Clearing account:
  1. Go to Transaction Center > Transaction Entry > Cash Receipts and create a new cash receipt transaction.
  2. On the First line, enter the project number, manually enter the invoice number, and the account that was debited when the original invoice was posted. This will be a negative amount.
    Note: In most cases this would be the Accounts Receivable Account.
  3. On the second line, enter a holding\clearing General Ledger account. If needed, enter a project number, preferably an overhead or memo project.
    Note: The net effect of this Cash Receipt transaction lines will be zero, so it will not affect cash but move the overpayment to the holding account. When the Cash Receipt is posted, it will debit the Account Receivable account and credit the holding\clearing account.
Steps on issuing a check to the client:

If the client is set up as a vendor, then the steps are as follows:
  1. Go to the Transaction Center > Transaction Entry > AP Vouchers and create a new voucher or, Transaction Center > Transaction Entry > AP Disbursement and create a new disbursement.
  2. Enter the holding\clearing General Ledger account used in the Cash Receipt above.
    Note: If a project number is needed then use an Overhead project. This will clear the holding\clearing account.
  3. Post the Voucher or Accounts Payable disbursement.
  4. Once posted go to Accounting > Accounts Payable > Payment Processing and pay the Client\Vendor referencing that voucher.
    Note: If the client is not set up as a Vendor, then a Cash Disbursement can be used instead of an Accounts Payable voucher or AP Disbursement.
Important Note:

These steps are only for situations where the client has been billed and payment has been received in full from the client. Additionally, the amount must be discussed and verified with the client, the amount never should have been billed, and the amount received will be refunded.

These steps should not be applied to refund overpayments of retainers.

 
Details  
 
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