🧭 Customer return to refund
Handle goods coming back from a customer from start to finish: record the return, issue the credit note, and pay the refund if the customer had already paid.
Why and when you use it
A return touches stock, GST and the customer's balance. If you skip a step, the customer may be refunded twice, or still show as owing money, or your GST stays too high. This workflow shows the right order and which screen does what.
Before you start
- The original sales invoice exists in Sales Invoices
- The returned goods have been received and checked
Step by step
- Record the returnIn Returns, press New Return, link the original invoice, Add Item for each returned product, give the reason and Save Return. Approve it once checked.
- Issue the credit noteIn Credit Notes, press New Credit Note, pick the invoice and the return, enter the amount and press Issue Credit Note.
- Decide: adjust or refundIf the customer still owes money, the credit note reduces their balance and you stop here. If they had already paid in full and want money back, go to Refunds.
- Create the refundIn Refunds, press New Refund, pick the customer and amount and link the return. The refund moves through Pending, Approved and Completed.
- Pay and recordPay the customer by the agreed mode and complete the refund so the Mode and Date are recorded.
- Check the balanceOpen Receivables and confirm the customer's Outstanding is correct.
Worked example
Mehta Medicals, Pune, sold a hospital 10 boxes of surgical gloves at ₹650 each plus GST (5% in this example), ₹6,825 in all, paid in full by UPI. Two boxes arrive torn and the hospital asks for its money back on 18 Nov 2026.
- Returns: New Return linked to the original invoice, Add Item gloves quantity 2, reason Damaged, Save Return; approved by the owner.
- Credit Notes: New Credit Note for the invoice and return, amount ₹1,365 (₹1,300 + GST ₹65), Issue Credit Note.
- Refunds: New Refund for the hospital, amount ₹1,365, linked to the return.
- The refund is approved and paid back by UPI; it is marked Completed with Mode UPI and Date 18 Nov 2026.
- Receivables shows the hospital with no outstanding balance.
Result: The 2 boxes are accounted for in stock (as damaged), output GST is reduced by ₹65, the credit note is used by the refund, and ₹1,365 leaves the bank.
💡 Tips
- Refund only after the credit note is issued, so the refund has a document behind it.
- Keep damaged returned goods separate and write them off with Damage / Spoilage in Inventory if they cannot be sent back to the supplier.
⚠️ Common mistakes
- Paying the refund in cash without recording it in Refunds, so your cash balance does not match.
- Issuing a credit note and a refund for a customer who still owes money; adjust the credit note against their dues instead.
Questions
Can I refund without a return, for example for a price overcharge?
Yes. Issue a credit note for the overcharge and then a refund against it.
🎬 Video walkthrough (script — recording coming soon)
- Scene 1: The three screens in order: Returns, Credit Notes, Refunds.
- Scene 2: Save and approve a return linked to the invoice.
- Scene 3: Issue the credit note for ₹1,365.
- Scene 4: Create and complete the refund.
- Scene 5: Check the customer in Receivables.