Processing Refunds for Cancelled Orders

These sections provide some examples of how refunds are processed when an order is cancelled.

Cancellation of a Sales Order with a Deposit, Full Refund with Company Check Scenario

Suppose you have a sales order for 125 USD where the customer paid with a deposit of 50 USD. The sales order is then cancelled. You allow refunds of deposits and as such a full refund will be given using company check.

Note:

The Accounts Receivable business unit must have an associated Accounts Payable business unit and Accounts Payable origin ID. The customer must have a related supplier ID.

1. The order is cancelled and a refund is recorded in the Customer Deposit component.

2. The Order Management Billing component (OM_BILL) sends a negative invoice line to Billing for the deposit refund.

3. Billing creates a pending item for the credit in Accounts Receivable.

4. An open item is created in Accounts Receivable for -50 USD.

5. You then manually send a request to an Accounts Receivable clerk to create a refund for the sales order.

   Note:

   There is no automated method for notifying the Accounts Receivable clerk of the check refund.

6. The Accounts Receivable clerk then manually creates a refund using the Accounts Receivable Maintenance Worksheet.

   The on-account item, referencing the sales order, is selected from the worksheet.

7. The Accounts Receivable Update process updates open item activity and the customer balance by 50 USD.

8. The Accounts Receivable Refunds Process loads the refunds into the Payables voucher tables.

9. The Accounts Payable Voucher Posting process builds the voucher payable to the customer.

10. The Accounts Payable Pay Cycle process creates the payment for 50 USD to customer.

    Note:

    Alternatively, instead of refunding the credit using a company check, the credit can remain on the customer's account and then be applied to a subsequent open item.

    Event	Accounts Receivable Open Item	Customer Balance	Accounting Entries
    Invoice creates Open Item IT-01	-50 USD	-50 USD	Dr AR -50 USD Cr Customer Deposit -50 USD
    Refund on-account MT-09	Closed	0 USD	Dr AR 50 USD Cr Refund Control 50 USD
    AR Refunds Process	NA	NA	Dr Refund Control 50 USD
    AP Voucher Posting	NA	NA	Cr AP 50 USD
    AP Pay Cycle	NA	NA	Dr AP 50 USD Cr Cash 50 USD

Cancellation of a Sales Order with Deposit, Full Cash Refund Scenario

Suppose you have a sales order for 125 USD where the customer paid with a deposit of 50 USD. The sales order is then cancelled and a full cash refund given.

1. The order is cancelled and a refund is recorded in the Customer Deposit component.

   The 50 USD payment is handed back to the customer at order cancellation time.

2. The Order Management Billing process (OM_BILL) creates a negative invoice line in Billing for the deposit refund.

3. Billing creates a pending item for the credit in Accounts Receivable.

4. An open item is created in Accounts Receivable for -50 USD.

5. The Cash Drawer is reconciled and the Cash Drawer Receipts (CDR_LOADPMT) process sends a payment of -50 USD to Accounts Receivable which references the sales order.

6. The Accounts Receivable Payment Interface process (AR_Payload) creates a payment for -50 USD which references the sales order.

7. The Accounts Receivable Payment Predictor applies the payment to the open item by matching the payment sales order reference to the open item sales order reference.

8. The Accounts Receivable Update process closes the items and updates the customer balance.

   Event	Accounts Receivable Open Item	Accounts Receivable Payment	Customer Balance	Accounting Entries
   Invoice creates Open Item IT-01	-50 USD	NA	-50 USD	Dr AR -50 USD Cr Customer Deposit -50 USD
   Cash Refund payment processed by AR_PAYLOAD	NA	-50 USD	NA	Dr Cash –50 USD
   Cash Payment applied to Invoice WS-01	Closed	Applied	0 USD	Cr AR –50 USD

Cancellation of Sales Order with Deposit, No Refund Scenario

Suppose you have a sales order for 125 USD where the customer paid with a deposit of 50 USD. The sales order is then cancelled however, in this example you do not allow a refund of the deposit.

1. The order is cancelled and the nonrefundable deposit is processed in the Customer Deposit component (Zero Refund button).

2. The Order Management Billing process (OM_BILL) sends a negative invoice line for -50 USD to Billing.

3. The same process also sends an invoice line for a refund fee of 50 USD to Billing.

4. Billing creates a pending item in Accounts Receivable for 0 USD.

5. The Accounts Receivable Update process creates an open item from the invoice which references both the invoice and the sales order.

6. The Accounts Receivable Update process closes the open item.

   Event	Accounts Receivable Open Item	Accounts Receivable Payment	Customer Balance	Accounting Entries
   Invoice creates Open Item IT-01	0 USD		0 USD	Dr AR 0 USD Cr Customer Deposits -50 USD Cr Deposit Refund Fee 50 USD