How to Record a Chargeback in QuickBooks Desktop/Online?

A chargeback occurs when a customer disputes a transaction, and the amount is refunded to their card. It’s crucial for businesses to properly record these chargebacks in QuickBooks Desktop/Online to maintain accurate financial records and manage customer disputes effectively. QuickBooks provides two primary methods to record a chargeback: as a business expense or as a refund.

Depending on the circumstances, businesses may choose the appropriate option to Record a Chargeback in QuickBooks Desktop/Online. This will make sure that your reports and bank statements are accurate reporting. By understanding the different types of chargebacks and using the right recording methods, businesses can keep their accounts transparent and avoid potential discrepancies in their financial statements.

What is Chargeback in QuickBooks Online or Desktop?

A chargeback is basically a process in which a transaction is disputed or opposed and money is returned to the payer. It is frequently done as a result of an unauthorized purchase. Or else there are chances that you might receive a “Chargeback” for the sale. Accurate recording in QuickBooks is crucial for good bookkeeping and financial management. Accurate chargeback documentation promotes openness and enables companies to efficiently monitor client complaints.

A retrieval request may occasionally occur prior to a chargeback. A retrieval request is a request for sale documentation made to the bank that issued the card. Retrieval requests are frequently made because the cardholder is unaware of the transaction.

How to Manage Chargebacks in QuickBooks?

There are many reasons why you might receive chargebacks. Error, dissatisfied customers, or fraud could be the possible causes of it. In case you are unable to handle this situation, it will cost you money and time, Learn about what to do if you get a Chargeback in QuickBooks Online or Desktop.

Note: It’s highly recommended not to issue a refund or credit to the cardholder card, or through cash or check if you have received.

The financial institution conveys the message to QuickBooks Payments when the customers initiate a dispute charge with their bank or credit card company. As soon as the chargeback is received, QuickBooks checks the card for credits.

Situations where Chargeback and Credit are Unmatched:

There are many situations where the amount of chargeback and credit are unmatched. Following are the conditions for such a situation to occur.

1. If the amount of the sale and the refund differs.
2. If the chargeback has been submitted to your account and you, the merchant, give a credit to the card. Send a copy of the credit that was applied to the card in the event that this occurs, or documentation proving that a refund was made (such as a front and back copy of the canceled refund check).
3. In the event that a refund is issued outside of QuickBooks Payments. Send us proof of the payment right now.

If you failed to give a credit or if we were unable to match the credit to the chargeback, the customer’s card issuer will credit the cardholder with the amount of the original charge. You, the merchant, are then debited the credited amount plus a $25 fee. This charge isn’t a punishment. It’s employed to pay associated expenses.

What Are the Types of Chargebacks?

There are three types of Chargebacks in QuickBooks, namely; Merchant Error, Friendly Fraud, and Criminal Fraud. To know about each type in detail, refer to the pointers below.

Type 1: Merchant Error

If a customer’s card is mistakenly charged for a subscription or product they have already canceled, then there may be chargebacks.

Here are a few examples of the merchant errors:

• Having trouble locating or finishing the website’s canceling procedure.
• The merchant must not be satisfied with the product or service.
• Trying to get around a difficult return procedure.
• Once canceled, recurring fees still continue.
• The return period of the product has been exceeded.

Type 2: Friendly Fraud

Friendly fraud happens when a customer contacts their bank to dispute a valid payment rather than contacting the retailer directly to request a refund. This procedure is frequently used to get a refund through the bank without first contacting the seller.

Here are the examples of Friendly fraud:

• The customer is unwilling to pay the product’s price, or
• Customer is avoiding handling or restocking costs.

Type 3: Criminal Fraud

When fraudsters or hackers use a card improperly, unauthorized transactions may take place. The examples of criminal fraud are as follows:

• Transactions that are not recognized by the client.
• Charges that are made without the cardholder’s consent.

How to Record a Chargeback in QuickBooks Desktop/Online?

You can record a chargeback in QuickBooks Desktop or QuickBooks Online in two ways.

1. Record it as a business expense (Write a check)
2. Record it as a refund.

Solution 1: Record it as a Business Expense (Write a check)

Another way is to write a check and enter the chargeback as a business expense in QuickBooks desktop. Checks are formal requests in writing to a bank for the payment of a certain sum to the depositor. They are valued equally to money.

You have to write a check in order to record the chargeback as a business expense. You must refer to the step-by-step guide to do so.

• Select the Create (+) > Check.
• Choose the checking account that is used for credit card transactions by your merchant account processor.
• Choose the name of the customer you used to make the initial credit card payment. After this, put a note (such as CB) in its place to clarify that this check is truly a chargeback.
• Enter the chargeback item’s total amount.
• Now you must remove the tick mark from the Clear the Print later checkbox.
• Select the account that will be charged for the transaction under the Account section.
• Lastly, you will to click on the Save and Close option.

Solution 2: Record it as a Refund

The process of entering a chargeback through a refund is as follows:

• Go to the Customer menu and then either click on the credit memos or refunds, based on your requirement.
• From the displayed list of customers, you must choose the customer who is to receive the refund.
• Now, you must enter the goods and services you want refunded.
• After you have finished all the tasks, select the Save & Close.
• You will be redirected to Available Credit window.
• Select the “Give a refund” option and click the “OK” tab.
• Choose the method of refunding the transaction from the Issue this refund via dropdown menu in the Issue a Refund window if prompted.
• On the other hand, select the account that was used to pay the return if you choose Cash or Check.
• When you’re done, click on the OK button.

How to Record a Chargeback Manually in QuickBooks Desktop

It is advised that you manually record a chargeback because QuickBooks Desktop 2024 is unable to monitor both a refund and a chargeback in a single transaction. Because of this reason, you are required to make separate entries in order to keep track of the refunds and the chargebacks.

In QuickBooks Desktop, you can create a check that affects accounts receivable and then set an expenditure fee for the chargeback. This procedure will record the chargeback fee, remove funds from the affected bank, and produce a positive balance on the customer profile.

Follow the steps given below to manually record the chargeback manually in QuickBooks Desktop:

• Take a look at the Banking menu and choose Write Checks.
• Select the bank account that will have the check posted to it.
• Now, fill in the customer’s name in the Pay to the Order of field.
• Enter the complete amount of the credit or refund.
• Enter the Credit Memo numbers in the Memo section.
• Proceed to the Expenses tab after that.
• In the Account column, choose the Account Receivables option.
• Next, note the refund amount as well as record the customer’s name
• Lastly, click on the Close and Save tab.

How to Record A Chargeback in QuickBooks Online?

There are two ways to record a chargeback in QuickBooks Online, and for that you will have to enter your details, choose the right account, and record the transaction by saving it. Following are the ways of processing a chargeback in QuickBooks Online:

1. Record transaction as a Refund
2. Record transaction as a business expense

Its on you to decide which method to use, either way it will be reflected on your bank statements.

Method 1: Record the transaction as a Refund

In order to record the chargeback in QuickBooks Online, you must follow the steps given below:

• Click the +New icon, then choose between two options Give Refund or Refund Receipt.
• From the Customer drop-down, select the customer you wish to issue a refund for.
• Now you are required to select the Refund Receipt date.
• In the table, fill out the details regarding the original sale for which you have wished to receive a refund.
• Provide the Refund Amount that you wish to credit.
• Next, from the Payment Method drop-down box, choose the credit card that was used to make the initial payment.
• From the Refund From drop-down option, select the bank where you deposited the invoice payment.
• In the Product or Service column, list every item or service the consumer returned.
• Verify that all the information for the refund has been input, then click on the Save button.
• Select Print from the Credit Card Transaction Status window if it is required.
• Once all the tasks have been completed, you must close all the tabs.

Method 2: Record Transaction as a Business Expense

This method of recording chargeback in QuickBooks Online involves writing a check. Learn how to record transaction as a business expense so that it is reflected on your bank statement.

• After you choose the + New icon, select the Expense option.
• From the Payee drop-down menu, select the bank account and the customer name that was used by you for the initial credit card payment transaction.
• Now, you must remove the check number. Also, you can indicate that this is a chargeback by writing a remark.
• You must select the Payment method, payment date, and Payment account.
• Next, make sure the tick mark from the Print Later checkbox has been removed.
• From the Account column, select the account you want to charge for the transaction.
• Click the tabs for Save and Close.

When everything is finished, you may run the Customer Balance Summary report to find out which invoices and payments comprise each customer’s current outstanding balance. Simply select the Reports option and look for the Customer Balance Summary report to find this.

Conclusion

When you are to record a chargeback in QuickBooks Desktop or in QuickBooks Online, it becomes very important for you to maintain accurate financial records and manage disputes effectively. If you follow the steps outlined in this article, you will be able to handle the chargebacks without any issues, and there will be less errors or discrepancies. Whether you choose to record a chargeback as a refund or a business expense, using the right approach will help you stay compliant and organized. Understanding the types of chargebacks and learning how to manage them in QuickBooks will enhance your business’s financial management.

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Frequently Asked Questions

How do I Record a Chargeback in QuickBooks Desktop or QuickBooks Online?

To record a chargeback in QuickBooks Desktop or Online, you will have to either enter it as a refund or record it as a business expense. You can decide to choose either of these options by keeping in mind about what’s best for your as per your business needs.

Can I Manually Record a Chargeback in QuickBooks Desktop?

Yes, you can manually record a chargeback in the QuickBooks Desktop accounting software. This application doesn’t track chargebacks and refunds in a single transaction, so you must create separate entries to manually record a chargeback and ensure accurate tracking.

What are the Common Reasons for Chargebacks in QuickBooks?

Common reasons include merchant errors, friendly fraud, and criminal fraud. Understanding these types will help you record a chargeback in QuickBooks Desktop/Online correctly.

How can I Avoid Chargeback Errors in QuickBooks Online?

Make sure to follow QuickBooks’ recommended procedures for refunds and disputes, and always use the correct accounts to record chargebacks.

What happens if a Chargeback and Credit do not Match in QuickBooks?

If the amounts differ or you issue a refund outside of QuickBooks, provide proof of credit issued or refund made to maintain proper records when you record a chargeback in QuickBooks Desktop/Online.