How to manage refunds and returns with Sunrise by Lendio

Accounting for refunds & returns

How to deal with a customer who gets a refund, or when you return a product
Accounting has a particular language. In normal speak, a refund is the same as a return. But when you are running your business finances, these are very different things. 

When you return a product you don't need

Let's say you buy a printer. Then you realize that you didn't really need it, like what often happens when Costco is having a sale! So you head back to Costco and get your money back. 

In Accounting-speak, this is called a refund, since you got refunded, 're' + 'funded' i.e., your credit card account received those funds (money) back into it. 

In Sunrise, this is easily reconciled by merely applying the positive value of the refund back into the expense account from which it came. If you purchased a printer and it was reconciled in "Office Equipment" for -$250, then you just take the +$250 in your transactions and apply it back to Office Equipment:

  1. Select the refund transaction on your reconcile page; it should be a positive amount equal to the purchase.

  2. Select 'Create another transaction.'

  3. In the description, add the word 'Refund' at the beginning for reference later.

  4. In the Account option, choose the same expense category as the purchase.

  5. Check the fields are correct and click 'Match.'

What do you do when one of your customers receives their money back from you?

First, make sure you have an account created called "sales, returns, and allowances" in your Revenue category.

This sales, returns, and allowances account is a contra account that provides a negative adjustment to your Revenue account in your P&L statement. 

What this means is that if you have $100 in revenue, and a customer got a refund for $10, your P&L would look like:

Revenue: $100

Returns: -$10

Total Revenue: $90

Ok, you have that account created yet? 

Next, head on over to your Accounts > Reconcile, then find the negative balance that is the return. 

Click on the return transaction, select Create another transaction, move that amount to your new Returns account, and label it clearly before matching.


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