This article is relevant if you are seeking a practice to process cash refunds from Vendors in NetSuite.
Background
When returning items to vendors, we often think of using a debit memo to effectively debit accounts payable. NetSuite calls debit memos, “Vendor Credits”. A vendor credit can then be applied to future bills in lieu of standard bill payment.
However, there are situations where the vendor will return funds versus asking them to be applied in a subsequent vendor bill. It’s not obvious how to processes these vendor cash refunds within the NetSuite.
Avoid Journal Entries and Accept Vendor Refunds in NetSuite
When it is not obvious how to process something in NetSuite, the general accountant will revert to using journal entries. Everyone on my team recognizes that I avoid using journal entries in NetSuite when I can. I tend to think of journal entry transactions as the accountant’s “hammer / nail”. Of course, while they can work to produce proper accounting, the fact that NetSuite’s GL system is transactional-based, it is valuable to understand that journal entries do not always participate well in sub-ledger transactions. Many NetSuite users have a “no-name” reference on their AP and AR agings because these journal entry transactions can’t be applied to other transactions.
Suggested NetSuite Practice for Vendor Cash Refunds
Thus, here is the suggested practice for accepting a cash refund from a vendor in NetSuite:
- Vendor Credit: first produce the vendor credit. Generally, this would be the first step if you are leading the story to expect your money back. Click the image for an illustration.
- Bank Deposit: use the Other Deposits feature of the bank deposit transaction. Reference the vendor name and the respective accounts payable account. Click the image for an illustration.
- Use Vendor Payment to Apply Funds: create a vendor payment transaction to apply the vendor credit to the bank deposit. The actual vendor payment transaction may not actually generate if the value total nets to zero. Yet the logic in the application will produce the application of the bank deposit to the vendor credit.
- Review Vendor Credit: review the vendor credit to confirm that the bank deposit has been applied.
Work with NetSuite Best Practice Leadership
With a bit more consideration, we can use NetSuite to help keep our sub-ledgers clean and this will help with the period end reconciliation work. If you found this article be helpful, feel free to receive notifications of new articles. If you would like to work with NetSuite professionals who hold high standards for care, let’s have a conversation.
Marty Zigman
Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.
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Great article, thanks.
As an alternative to using a Vendor Payment as described in step 3., you can also edit the Vendor Credit and navigate to the Apply subtab and select the deposit there.
Thank you Meir!
May I ask about the vendor check refund in NetSuite?
I already did a custom transaction to receive the check from the vendor as a work around, but if there’s another standard solution it would be better
Hello Eman,
I may be confused. Is this article not about vendor check refund?
Marty
How would this work if it was a refund back to a credit card? It doesn’t appear in the bank deposit, and I can’t find a way to apply a credit card refund to a Vendor Credit.
Tim,
This one looks tough as the system does not want to let you attack the AP or Credit Card ledger accounts from the line level. I assume that the Vendor Credit is doing this:
dr Accounts Payable
cr Expense or Asset
Now, the vendor owes you a credit (debit memo). But you want a credit card refund for this and you are using NetSuite’s Credit Card Ledger. Would it have been possible to not record the Vendor Credit as it is going against AP vs. the Credit Card? I speculate not if you are using Vendor Return Authorizations.
We thus would have to do the following. Create a clearing account that should be zero balance on the GL. Create a Vendor Bill to remove the Vendor Credit:
dr Clearing Account
cr AP
Now the AP balance is clean and the debit is sitting in the clearing account.
Use the Credit Card ledger to create a credit pointing to the clearing account:
dr Credit Card Ledger
cr Clearing Account
Admittedly, that’s a lot of work. But it would avoid the journal entry.
Marty
The added benefit of this solution is that you cannot make a journal entry against an Intercompany vendor but the solution offered by Marty works even when the offset is to an AP account marked for elimination. Thank you!
Thank you Carolyn,
I always like to challenge my thinking to produce transactions without using journal entries. Your comment is quite helpful for intercompany situations.
Marty
To address Tim’s question about a credit card refund, one way to handle this is to
1. Create the Vendor Credit and Save
2. Create the Deposit
a. Enter the “Other Deposit” details as listed above
b. Under “Cash Back,” enter the amount of the credit and select the Credit Card account.
c. Save the Deposit
3. Apply the Bill Credit to the Deposit to complete the cycle.
This approach relieves you of the need to utilize a clearing account and associated extra transactions.
Thank you Clay. I will need to review that approach.
Marty
After wasting lot of time trying to do this with journal entries, this finally worked for us! Thank you so much!
I can’t see the deposit on the Vendor account.
Any resons why is that? Thank you.
Hello Alex,
That’s hard to say. Are you able to see the GL impact on your transaction and track from there?
I have a vendor credit in the system. A portion of it is going to be applied to another invoice, which I know how to do. I need to expense the remaining balance and clear the subledger at the same time. How do I do this. There is no cash being received? Do I need to create another invoice for the difference and apply the credit to it?
Hello Rosyln,
Yes, the easiest approach is to create a new vendor bill to the vendor with a line item pointing to expense you are targeting. Then apply the vendor credit.
Marty
Hi Marty
agreed on avoiding journals and the using the ‘other deposit’ tab. This is a useful UI solution.
Is it possible to do a csv import to apply the deposited refund against the bill credit ?
I can’t see deposits as an option on the ‘Transactions’ dropdown on the CSV import page
Hello Gerry,
Yes, our license free Record Import Export Manager (RIEM) can take a CSV file and target that record. We help our clients all the time take on all the places that NetSuite does not provide full CSV support:
https://blog.prolecto.com/2020/04/04/fully-automate-complex-netsuite-data-imports/
Marty
Hi Marty,
thank you provide the solution, but I can’t see the deposit from apply tab when i do bill payment, i can only see the bill credit.
Hello David,
Did you create the first step to reference the appropriate Accounts Payable account (it can be trickier if you have more than one) and the vendor in the name as illustrated in the screenshot?
Marty