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Xero Bookkeeping – How to handle overpayment in Xero, and how to refund overpayment

images/xero icon.pngTo handle customer overpayment in Xero can be takes a couple of steps.

Let’s take a look at a few ways we can record an overpayment and apply this to an invoice/bill or refund it directly. In Xero, the term “invoice” relates to a sale, and a “bill” relates to a purchase. I’ve only referred to invoices below, but these processes relate to both sale invoices and purchase bills.

3 Ways to Record (handle) an Overpayment, you can either:

  • Simply enter the amount that was paid to you  (or you over paid), directly onto the invoice or bill payment at the bottom and if the amount exceeds the total, Xero will automatically calculate an Overpayment transaction.
  • Create an Overpayment Receive Money / Spend Money transaction in your bank account
  • During reconciliation, create an Overpayment Receive Money / Spend Money transaction

Allocate or Refund Overpayment to Customer (Resolve the overpayment)

Once the Overpayment transaction has been entered into Xero, a cash refund can be recorded or you can allocate the overpaid amount to an invoice for the same Contact in Xero.

  • The Allocate option will appear in the Overpayment Options drop down menu while viewing your Overpayment transaction.
  • If a contact has a new invoice you created Xero will ask if you wish to allocate the overpaid amount against this invoice.
  • You can record Cash Refunds on the Overpayment directly and then reconcile them with your Bank Statement line.

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Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
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