How to Refund a Customer for an Overpayment or Credit in Sage 100
Why Would You Need to Issue a Refund for a Credit or Overpayment?
Sometimes, an invoice is overpaid, or a credit memo is issued, but no future "debit" will be applied. While the Sage 100 Accounts Receivable module does not provide for a Refund type of transaction, you can still use the following steps to create the correct debits and credits to your General Ledger and create an Accounts Payable check for the customer's refund.
Handling transactions like these quickly and efficiently helps your company maintain customer trust and goodwill and will hopefully lead to future referrals and additional sales.
How to Refund a Customer for Overpayment or Credit in Sage 100: Overview of the Process
In our example, we’ll assume that Customer 01-ABF overpaid invoice 0100042 by $1,326.25, leaving them with a balance of -$1,326,25 (seen in the image below).
Since we do not expect a future debit on their account, we must refund the customer $1,326.25.
Here are the main steps you must follow to issue this refund (we will go over these in detail in a moment):
First, you will create a new cash-clearing General Ledger account or select an existing one to be credited during the invoice adjustment. The G/L account you create or select will be debited during the check entry.
Next, you will enter a positive invoice adjustment to zero out the existing credit balance invoice. Alternatively, you may add a positive amount to zero out the existing credit memo.
Finally, you will enter a manual check using the NOF (not-on-file) vendor.
Ready? Let’s get started.
First, You Will Create a Cash-Clearing General Ledger Account (or Select an Existing G/L Account to Be Credited)
In this section, you will learn how to create a cash-clearing account from the Assets section of your General Ledger Chart of Accounts.
1. Begin this process from the Main Account Maintenance screen.
To get to this screen:
Open General Ledger
Navigate to the Setup menu
Select Main Account Maintenance
2. From the Main Account Maintenance screen, you will create a new G/L Main Account. Its account type will be “Asset”.
Make a note of the Main Account number you create here. You will need it very soon.
3. In the new account, type an applicable Description and Short Description.
In this example, we used “Cash Clearing” as our Description and Short Description.
4. Click Accept.
5. Continue this process from the Account Maintenance screen.
To get to this screen:
Open General Ledger
Navigate to the Main menu
Select Account Maintenance
6. Manually type in the Main Account number you noted down in Step 2.
Note: **NEW** will show in the window near the top.
7. Click Accept.
Next, You Will Enter a Positive Invoice Adjustment to Zero Out the Existing Credit Balance Invoice
In this section, you will learn how to create the correct debits and credits for your General Ledger.
Note that you can enter a positive adjustment to the negative invoice OR enter a positive amount to adjust a credit memo.
Also, note that you should use the original invoice number or credit memo number to create the adjustment.
1. Begin this process from the A/R Invoice Data Entry screen.
To get to this screen:
Open Accounts Receivable
Navigate to the Main menu
Select A/R Invoice Data Entry
From the A/R Invoice Data Entry screen:
2. Fill in the Invoice Number.
Enter the original invoice number to be adjusted.
The system will prompt you, saying, "Invoice number already used. Would you like to accept?"
Click OK to accept the prompt.
3. Fill in the Customer No.
Enter or select the applicable customer number from lookup.
The system will prompt you, saying, "Invoice already exists. Would you like to adjust?"
Click Yes to accept the prompt.
4. Click OK at the Original Totals window.
5. Click the Lines tab.
6. Type M as the Item Code.
7. In the Amount column, enter the amount needed to bring the balance to zero.
As we said earlier, you may enter a positive or negative amount to credit the balance transaction and bring the balance to zero.
8. In the GL Account field, select the Cash Clearing General Ledger account.
This is the account you created in the first section.
Note: If you chose to skip that first section and used an existing G/L account for this purpose, select the existing account here.
9. Click Accept.
Note: When the Accounts Receivable Sales Journal is updated, a debit will be posted to the Accounts Receivable account, and a credit will be posted to the Cash Clearing account.
Finally, You Will Enter a Manual Check
This section will teach you how to create and print a refund check from Accounts Payable.
1. Begin this process from the Manual Check and Payment Entry screen.
To get to this screen:
Open Accounts Payable
Navigate to the Main menu
Select Manual Check and Payment Entry
2. From the Manual Check and Payment Entry screen, access the Header tab.
3. Fill in the Check No. after you decide how you want to print the check.
You can either choose to quick print a check, or you can record a manual check.
To quick print a check on the fly:
Click the Quick Print Check (printer icon) button.
To record a handwritten or typed check:
Enter the check number, or click the Next Check Number (paper with pound symbol and green arrow) button to obtain the next check number.
Note: Selecting the Next Check Number assumes the system has been accurately keeping track of check stock.
4. Fill in the following information:
Check Date — Enter the desired check date.
Check Amount — Enter the amount of the refund to be issued.
Vendor No. — Enter NOF for the vendor number (NOF means "Not On File").
For the NOT ON FILE VENDOR field that appears, replace the field value with the payee name of the customer.
Comment — Enter a comment for the check (up to 40 characters), if desired.
5. Access the Lines tab.
6. Fill in the Invoice No.
Enter the invoice number of the invoice or prepayment for which the refund is being issued.
The system will prompt you, saying, “Is this a new invoice?”
Click Yes to accept the prompt.
7. Fill in the following information:
Invoice Date — Enter the desired invoice date.
Invoice Amt — Enter the amount to be refunded.
8. Select [check] the G/L Distribution check box in the secondary grid.
9. Click the Edit Distribution [grid box] button.
This will open the General Ledger Distribution task window. From this window:
10. Fill in the following information:
G/L Account — Enter the Cash Clearing account you created or used earlier.
Amount — Enter the amount to be refunded.
Comment — Enter a comment for the G/L Distribution, if desired.
11. Verify that the Distribution Balance is $0 and the Distribution Total is correct.
12. Click Accept to save changes and exit the General Ledger Distribution task window.
13. Verify that the Check Distribution Balance is $0 and that the Payment Total is correct.
14. Click Accept to save changes in the Manual Check and Payment Entry task window.
Note: If you selected the Quick Print Check button, a Manual Check Printing pop-up task window should appear now. In that case:
Select or verify the Form Code, Check Date, Check Number, Check Form Type, etc.
Select/verify the printer.
Place the appropriate check stock paper in the printer.
Click Print to print the check.
Close the Manual Check and Payment Entry task window.
15. Continue this process from the Manual Check and Payment Register task window.
To get to this window:
Open Accounts Payable
Navigate to the Main menu
Select Manual Check and Payment Register
16. Verify the Accounts Payable posting date.
Select/verify the printer.
Click Print to print the register.
Review and update the register.
Note: If you frequently process refunds, you can save time by creating a Sales Code for Account Receivable using the Cash Clearing account for the Sales account.
Conclusion
Processing customer refunds promptly and accurately in Sage 100 helps maintain customer trust and goodwill, potentially leading to future referrals and additional sales. By following the systematic three-step approach outlined in this document, businesses can maintain proper accounting records with the correct debits and credits in the General Ledger while efficiently issuing refund checks through the Accounts Payable module.
For companies that frequently handle overpayments or credit balances, mastering this process saves time and prevents accounting errors. The structured workflow creates transparency in financial records, simplifies reconciliation, and provides a clear audit trail for all refund transactions. Additionally, businesses can streamline operations by creating a dedicated Sales Code for Accounts Receivable using the Cash Clearing account for the Sales account, making the refund process even more efficient.
Next Steps
If you have questions about refunding a customer for an overpayment or credit in Sage 100, Ardent Consulting is at your service. Our team of experts is ready and eager to help you navigate your system challenges and optimize your business’s potential. We prioritize your business’s health and are committed to supporting your journey every step of the way.