Record a vendor credit or supplier refund in QuickBooks

Which transaction should you use?

A supplier credit note reduces what you owe a supplier, or entitles you to money back; what a credit note is explains the document. The steps below follow Intuit's help article, which is the US edition and says vendor. UK versions use supplier wording, for example Supplier credit, so look for that where the steps say vendor credit.

Intuit suggests asking your accountant if you are unsure which route fits your books.

Create the vendor credit for a bill

Use this when you track purchases as bills.

1. Select Create, then Vendor credit.
2. Pick the Vendor.
3. Enter the Category or Item details so they match the original bill. Category details vs item details explains the choice.
4. Select Save and close.

If you pick an inventory item, QuickBooks puts it back into inventory. When the goods were defective or you do not want them added back, Intuit says to make an inventory adjustment.

Example (illustrative): a supplier bill for £1,200 included £200 of goods you returned. The credit note is for £200. You enter a vendor credit for £200 against the same expense category as the bill.

Apply the credit to a bill

1. Select Create, then Pay bills.
2. Select the bill you want to pay.
3. QuickBooks automatically applies the available credit to it.
4. Check the Credit Applied amount.
5. Select Save and close.

In the example, the £1,200 bill now needs £1,000 paid.

The supplier already refunded a paid bill

Sometimes you have paid the bill and the supplier sends the money back. This needs three steps.

1. Create the vendor credit as above, matching the original bill.
2. Create a Bank deposit. Under Add funds to this deposit, set Received From to the vendor, and set Account to Accounts Payable (A/P). Enter the payment method and the refund amount. Intuit stresses that you must choose Accounts Payable, because that links the deposit to the vendor credit.
3. Select Create, then Pay bills, and choose the bank deposit you just created. Check that Credit Applied equals the deposit and that Total payment is zero.

If you recorded the original purchase as an expense or cheque rather than a bill, skip the vendor credit. Create a Bank deposit, set Received From to the vendor, and choose the same Category/Account you used for the original expense. Add the customer or project only if the refund relates to one.

Record a refund to a credit card

When the supplier refunds a purchase to your card:

1. Select Create, then Credit card credit.
2. Choose the vendor in Payee.
3. Choose the card in the Bank/Credit account field.
4. Enter the date, amount, tax and category. The category must match the original expense account.
5. Select Save and close.

Mistakes to check for

• Using the wrong account on the deposit. For a paid bill, the deposit must go to Accounts Payable, not straight to a category. Otherwise the vendor credit stays open.
• Mismatched category. The credit should use the category or item from the original bill, so the reduction lands where the cost was first recorded.
• Skipping the tax field. The credit card credit form asks for tax as well as amount. Enter what the supplier credit note shows.

If you capture supplier documents with Datamolino, it detects a supplier credit note and pre-selects the Supplier Credit export type, so the credit reaches QuickBooks Online as a vendor credit with the original attached. A refund to a card can go as a Credit Card Credit instead. You then apply the credit in Pay bills as described above; the QuickBooks integration page lists the export options.

Where do I apply a vendor credit to a bill?

Use Create, then Pay bills, and select the bill. QuickBooks applies the available credit automatically. Check the Credit Applied amount before you save.