Refunding Money to Clients

In this article:

• Processing a Refund
• Finding and Editing Previous Client Refunds
• Refund Transaction Types
• Client Refund vs. a Withdrawal
• Reporting on Refunds

You can return money a client has given you by issuing a refund. Refunds are typically used in two instances:

• When a client has paid you more than you are owed.
• When there's a credit note that will most likely not be applied to an invoice.

If you need to complete a refund that doesn't fit into these scenarios, you should process a withdrawal instead.

Additionally, refunds are not a function of trusts or retainers. A refund is where funds have been received into your business bank account and not applied to a general retainer. There are separate processes for working with trusts and retainers.

Processing a Refund

When creating a client refund, you can enter the details of the refund. 

To do this:

1. Click the global Create button and choose Client Refund from the Billing section. (You may need to click Show all if you don't see this option.) The New Client Refund window appears.
2. Complete the following fields:
   • Payment from: Select the account the refund will be withdrawn from. The refund will create a banking transaction that will appear in your financial reporting and your bank reconciliations.
   • Date: Enter the date the refund was processed.
   • Payment to: Use these drop-down lists to identify who the refund will be paid to. 
   • Payment method (and related fields): Choose the method you want to use for processing the refund. Based on your selection, additional fields will be displayed. 
   • Journal memo: Enter an explanation of the transaction and why you are processing a refund. This will help you identify the cause of the transaction at a later date and in your reconciliations. You can use the Quick-code drop-down list to assign a pre-saved memo.
     
     Once you select the refund recipient, each item that is available to be refunded will be displayed below. The unallocated amount is the amount that you can refund for the item. If there are multiple items for a client then all will be displayed.
     
     
3. In the Applied field, enter the amount that you would like to refund. To refund all of the unallocated amount, click the arrow icon next to the unallocated amount.
4. When you're finished, click Save to save your work. 

Finding and Editing Previous Client Refunds

You can find and edit a client refund once it's been created. There are restrictions on when an accounting transaction can be edited such as if it is part of a saved bank reconciliation or a saved tax return.

To do this:

1. In Actionstep, go to Billing > Payments. The Payments page appears.
2. Locate a refund by searching for Client refund in the Entry type column.
   
   NOTE:  You can filter this list to show just client refunds. To do this, click the Filter drop-down list and choose Show available filters. Then click Entry Type and choose Client refund. Then click Done, followed by Submit.
   
3. Click the Client refund link to open and view that transaction. 
4. Make any changes.
5. Click Save to apply the changes. 

Refund Transaction Types

There are two types of transactions that you can refund in Actionstep:

• Overpayments or unallocated funds
• Unapplied credit notes

Each of these are explained below. 

Overpayments or Unallocated Funds

When you are processing a client receipt (a payment from a client towards a bill or bills that you have issued to them), there are two parts of the form where you enter the amounts: 1) the deposit amount and 2) the applied amount:

The deposit amount is the amount of money that will be going into your bank account, while the applied amount will be the total of the funds that you have applied to your bills. In most situations, these two numbers will match. You cannot apply more to an invoice than what you deposit into your bank account and clients rarely overpay you. 

However, when there is an overpayment, the client receipt will include options for the unallocated funds, which happens when you deposit more than what you can apply to an invoice 

If your firm uses general retainers, you can move the unallocated funds to the retainer. Otherwise, you must leave them unallocated until you can apply them to another invoice. (That invoice must created so that it is dated on or before the date of the payment with the unallocated funds.)

Unapplied Credit Notes

Credit notes are created from an invoice when you want to either refund or write off part or all of the invoice. In most cases, you will create a credit note to apply it to an existing invoice reducing the amount owed to the client.

In some situations, you could have a credit note open for a client but have no intention of invoicing that client again so there is no invoice to apply it to. In this case, you can use a refund to return these funds back to the client. 

For example, say you have invoiced a client and they have paid, but after payment, they dispute part of the bill. You agree to credit them for that part of the bill but you do not expect to engage them for any further services. Because you will not invoice them again, you wish to refund the credited amount back to the client.

Client Refund vs. a Withdrawal

If you want to send funds to a client but it is not related to a credit note or an overpayment, you can create a banking withdrawal instead. Banking withdrawals are typically used for one-off payments that were made by the business that you did not get an invoice for. See Creating a Firm Withdrawal for help.

Reporting on Refunds

You can view a list of all refunds associated with a specific bank account.

To do this:

1. In Actionstep, go to Accounting > Banking. The Banking page appears. 
2. Click the ellipses icon to the right of the bank account where you have issued the refund and choose Transactions.
   
3. Click the Filter drop-down list and choose Show available filters. 
4. Click the Entry Type drop-down list and choose Client Refunds. This will give you a list of all refunds.
   
5.  Click Submit. The Transactions list is filtered to show just your client refunds.

Related Articles:

• Working with Unallocated Funds
• Actionstep Payments - Refunding Payments