Note: Before a payment can be reversed, Tabs3 Billing will check if the payment detail and the payment amount match. If they do not match, a message will be displayed indicating that the process is not allowed.

Only processed payments can be adjusted using the Payment Adjustment utility. If the payment is in work-in-process, you can edit the payment or delete it using the Payment Entry window. If the payment is in work-in-process and has been included on a final statement but not updated, you can unbill the payment and then edit it or delete it.

The Payment Adjustment utility allows you to reverse or refund a processed payment. Payment reversals are performed when you want to back out an entire payment. This is useful in situations where a payment was entered for a wrong client or when a check from a client bounced. Refunds, on the other hand, are performed when you want to return a portion of a processed payment. Refunds are useful when a client has overpaid the balance due and the difference will be returned to the client.

The payment adjustment process that Tabs3 Billing performs consists of four steps.

First, the client ledger records are updated. For every amount on every statement the payment applied to, the amounts are added back to the Due amounts. When performing a refund, the unapplied amount shown on the original payment record is reduced by the adjustment amount.
 

Next, a ledger record is created in the client ledger file showing that the payment has been adjusted. This record provides an internal audit trail of ledger activity that transpired for the client. The ledger record will show the date the payment was adjusted and will have a negative amount in the Payment Amount field equal to the amount of the reversal or refund.
 

Next, the receipt allocation information is updated by reducing the paid amounts.
 

Finally, the Amount field of the archived payment record is changed. If the payment was reversed, the amount is changed to zero. If the payment was refunded, the amount is changed to the difference between the original payment amount and the Adjustment Amount.
 

After the payment has been adjusted, the information is recorded in a temporary verification file you can print out for audit trail purposes. It is strongly recommended that you print the verification list.

Payment adjustments are shown on the Allocated Payments Report, Unallocated Payments Report, and Client Ledger Report as a separate line-items and optionally as a separate line-items on the Cash Receipts Report and Client Inactivity Report.

Tabs3 Billing Notes: The Payment Adjustment process does not create a work-in-process payment for the amount of the adjustment unless the Create a Payment for Client option is selected in the Payment Adjustment Options window. If you need to re-enter a payment that was reversed or refunded, simply add a new payment using the Payment Entry window.

Be aware that any statements that the payment applied to will still reflect a last payment date of the reversed payment. This information cannot be edited.

Assume a processed payment has been reversed or adjusted. If the statement that originally included this payment is reprinted using the Reprint Updated Statements utilities, the totals on the reprinted statement will not match the original totals.

Client funds Payment to Firm transactions withdraw funds from a client funds account and create payments to the client's accounts receivable account. If one of these payments to the client's accounts receivable account is reversed or refunded, the client funds account balance and payment to firm transaction are also adjusted.

Trust Note: Adjusting a payment that originated from a manual payment to firm in Trust will not affect the trust transaction in Trust. Any changes to the associated trust transaction must be made in Trust.

Trust Automatic Payments Note: If adjusting a payment record that originated from an automatic trust payment, a message will be displayed indicating that the associated trust transaction in Trust will not be affected. Any changes to the associated trust transaction must be made in Trust.

GL Journal Entries

If you are integrating with GL and journal entries were posted for the original payment, GL journal entries can be created when a payment is adjusted. After confirming you want to adjust the payment, an Adjustment Options window will be displayed. Depending on your selection, adjusting GL journal entries can be created:

Payment Reversal Reversing journal entries are automatically created for all GL journal entries associated with the payment. The original bank account entry and the negative bank account entry are marked as reconciled. For example, if the journal entries for the original payment were Debit Cash $300 and Credit Fee Income $300, the reversing journal entries will be Debit Cash -$300 and Credit Fee Income -$300.
Payment Refund

When a partial payment is adjusted, reversing journal entries are posted for the portion of the payment that was refunded, regardless of whether the GL journal entry to the bank account was reconciled, cleared, or part of a deposit. No journal entries are marked reconciled. The description for a negative deposit created by a Payment Refund is ***Tabs3 Payment Adjustment***.

For example, let's say a client made a $300 payment but only had a $200 accounts receivable balance thus yielding a $100 credit balance. Therefore, to refund the credit balance, a $100 payment adjustment is made. Let's say the journal entries for the original GL payment were Debit Cash $300, Credit Fee Income $200, and Credit Holding Account $100 . When the $100 payment is adjusted, the adjusting journal entries will be Debit Cash -$100 and Credit Holding Account -$100.

Note: In the event a payment entry had multiple debit or credit journal entries, then the amounts for the new journal entries are proportionately adjusted and any left over amount due to rounding will be included with the last debit and/or credit account.

QuickBooks Journal Entries

If you are integrating with QuickBooks using the QBXML format and QuickBooks journal entries were posted for the original payment, adjusting QuickBooks journal entries are created automatically when a payment is reversed or adjusted, provided both the transaction code and the client are configured to integrate with QuickBooks. The process is performed without the QuickBooks General Journal Entry window being displayed. The date of the adjusting journal entries is the date of the original payment.

Note: Adjusting QuickBooks journal entries are not made for payment transactions entered before Tabs3 Billing Version 11. Adjusting journal entries must be made using QuickBooks.

Note: Adjusting QuickBooks journal entries are not created in QuickBooks for payments that are updated in Version 11 prior to QBXML integration being turned on in Tabs3 Billing Customization.

Payment Reversal Reversing journal entries are created for all QuickBooks journal entries associated with the payment. For example, if the journal entries for the original payment were Debit Cash $300 and Credit Fee Income $300, the reversing entries will be Credit Cash $300 and Debit Fee Income $300.
Payment Refund When a partial payment is adjusted, adjusting journal entries are created for all QuickBooks journal entries associated with the payment. For example, if the journal entries for the original payment were Debit Cash $300 and Credit Fee Income $300 and $50 was refunded, the adjusting entries will be Credit Cash $50 and Debit Fee Income $50.

Note: In the event a payment entry had multiple debit or credit journal entries, then the amounts for the new journal entries are proportionately adjusted and any left over amount due to rounding will be included with the last debit and/or credit account.

See also:   Payments that Cannot Be Reversed
  Credit Card Voids & Credits