WooCommerce refunds in QuickBooks Desktop: a credit memo, then a refund

In WooCommerce a refund is one screen: pick what to give back, and the payment gateway returns the money (for a manual refund, you return it yourself). In QuickBooks Desktop it is two records, and the account you record it against decides whether the payout deposit still equals the bank line.

Three shortcuts that cause trouble later

Editing or voiding the original invoice. The sale happened. Voiding it takes it out of your sales history, and if its payment is already on a deposit, the deposit no longer adds up.
A minus line on the deposit and nothing else. The bank side is right, but sales by item, sales tax and the customer’s history still show the full sale.
Recording it against the bank account. A card refund usually comes out of the processor’s balance, not your checking account. Recorded against checking, it sits in the register as a withdrawal that never appears on the statement. Use the account the money really left.

The two records

1. A credit memo for what was given back: the same items as the invoice, shipping if it was refunded, and the same tax item. Sales by item come down, and so does the sales tax you owe.

2. A refund of that credit to the customer (in QuickBooks Desktop, “Give a refund” from the credit memo). The refund says which account the money came out of, and that choice is the one that matters for reconciling.

Where the money comes out of

WooPayments and Stripe take refunds out of your processor balance, so they normally reduce a payout rather than leaving your bank. Refund out of Undeposited Funds, where the payments are waiting: when the payout arrives, its deposit takes in the payments and the refund as a minus line, and equals the bank line. The processor’s payout report shows which payout carried each refund. (If the balance can’t cover a refund, Stripe can take it from your bank instead; record that one against the bank.) More in reconciling WooPayments payouts.

PayPal keeps money in your PayPal balance. If PayPal is its own bank account in QuickBooks, refund out of that account, the same place its payments went in.

Partial refunds

Give back only what was refunded: one item, the shipping, or an amount.

One item: a credit memo line for that item and quantity, taxed like the original.
An amount with no items (a goodwill refund, a price adjustment): use one item set aside for it, posting to an account such as Returns and Allowances, so these don’t blur into product sales. Check that its tax setting matches the original sale.
Sales tax alone: QuickBooks works tax out from taxable amounts, so a credit memo cannot give back tax by itself. Record the tax correction as a sales tax adjustment and the money returned to the customer separately, in the way your accountant prefers for your tax setup.

The processor’s fee

Processors usually keep the original fee on a refunded charge (WooPayments says so in its fee policy), and some charge a little more. The original fee is already in your books, so don’t record it again. Any extra refund fee shows up in the payout: record it once, as a fee line on that payout’s deposit, not on the credit memo. Card fees: on the invoice, or on the deposit? covers the choice.

Number refunds after the order

Give each credit memo the order number plus R1, R2 and so on (4826R1 for the first refund of order 4826). Anyone can find it from the order, and before entering one you can search for that number to make sure it isn’t already there. One caution: deleting a refund in WooCommerce renumbers the later ones, so check the order’s credit memos before reusing a number.

In NemoWorks Sync

Each refund of an order it booked becomes a credit memo and a refund, numbered 4826R1, 4826R2 and so on, out of Undeposited Funds (or your PayPal account), so it lands on its payout’s deposit as a minus line. It looks the number up first, so a refund already in QuickBooks isn’t entered twice. Refunds of orders it didn’t book (typed in by hand, or from before your start date) are left for you, with a note in the Queue saying so. The settings are under Settings, Refunds; the help center has the details.