How to Record a Disputed Payment in QuickBooks Desktop/Online?

A chargeback is a process where transactions are disputed, and money is returned to the payer because of disputes or unauthorized transactions. In other words, the sale is charged back to you. Recording it correctly in QuickBooks is important for proper accounting and financial management.

A chargeback is defined as a transaction reversal initiated through a customer’s bank or payment processor because of a dispute or unauthorized transaction. It is important to record it correctly in QuickBooks for proper accounting and financial management.

Checking the accurate recording of chargebacks in QuickBooks is important for maintaining the integrity of financial records. Chargebacks can have a significant influence on the reconciliation of accounts, as they impact the balance of transactions and might result in refunds.

Correctly accounting for chargebacks lets you maintain transparency and allows businesses to record customer disputes efficiently. Through this accurate recording in QuickBooks, all businesses can analyze patterns, recognize areas for improvement, and make well-informed decisions to minimize future chargebacks.

What Is a Disputed Payment and Why Is It Important to Record It in QuickBooks?

Disputed payment means any payment that a business firm has made or which has been made to it by another individual or firm, and the two do not agree on the payment. This may occur for various reasons, including billing disputes, fraud, or dissatisfaction with various products and/or services. 

An example of a payment dispute is a chargeback, where a charge becomes a subject of controversy, and the customer asks the bank to reverse the payment. It is crucial to note that chargebacks are a subcategory of payment disputes, meaning not all payment disputes result in a chargeback. Recording any questionable payments in QuickBooks assures one of the correct records. 

Regardless of the type of transaction, whether it is a chargeback or any other type of dispute, proper tracking and recording of such transactions ensure that the account gives the true and real position of the business, reducing errors and cases in the accounts and aiding in an efficient way of solving the dispute.

How to Record a Disputed Payment in QuickBooks Desktop?

To record a disputed payment in QuickBooks Desktop, either record it as a refund through the Customer menu or write a check via the Banking menu. Both methods ensure accurate bookkeeping.

Mentioned below are the two ways you can choose either:

1. Record the payment as a refund or
2. Write a check

Record the Transaction as a Refund

Follow these simple steps to record a disputed payment as a refund in QuickBooks Desktop:

Step 1. Open QuickBooks Desktop:

Start by opening your QuickBooks Desktop software.

Step 2. Click on the Customer Menu:

On the top menu bar, click on the Customer menu, which is located next to the Vendor menu.

Step 3. Select Create Credit Memos/Refunds:

From the Customer menu, choose Create Credit Memos/Refunds. This will open the Credit Memo screen.

Step 4. Select the Customer:

In the Customer: Job drop-down menu at the top of the Credit Memo window, select the customer disputing the payment.

Step 5. Enter the Refund Details:

1. In the Item section, select the product or service the customer is disputing or returning.
2. Enter the amount to be refunded if necessary.

Step 6. Click Save & Close:

Once you’ve entered all the details for the refund, click the Save & Close button at the bottom of the screen.

Step 7. Go to the Available Credit Window:

After saving, the Available Credit window will appear. Click on Give a Refund, then click OK.

Step 8. Choose How to Refund the Payment:

1. In the “Issue a Refund” window, select the method you want to use to issue the refund (Cash, Check, or Credit Card).
2. If you choose Check, select the bank account from which the refund will be issued.

Step 9. Click OK:

After entering the refund method and account details, click OK to complete the process.

Record the Transaction as a Business Expense

This is another option for recording a disputed payment in QuickBooks Desktop as a business expense by writing a check. Checks are considered written orders to a bank to pay a certain amount to the person who is depositing them. They’re known to be as good as cash.

1. Write a check 
2. Regular checks 

You commonly use regular checks to pay for your fixed assets, inventory, non-inventory parts, services, other charges, and any other expense that you track in QuickBooks Desktop. You also have the option to keep this money in a petty account or pay credit dues.

Follow the steps mentioned below to write checks:

To Write Checks:

Step 1. Go to the Banking Menu:

On the top menu bar, click on the Banking menu.

Step 2. Choose Write Checks:

From the Banking menu, select Write Checks.

Step 3. Click on the Expense Tab:

In the Write Checks window, click on the Expense tab to include shipping charges, liabilities (for payments related to liabilities or loans), and other expenses not related to any item in QuickBooks.

Step 4. Click on the Item Tab:

If you need to select an item, click on the Item tab and choose the relevant item from the drop-down list.

Step 5. Press Save & Close:

After entering all necessary information, click the Save & Close button to complete the check.

Alternatively, you can follow the steps mentioned below to keep your invoice unpaid:

To Keep an Invoice Unpaid:

Step 1. Navigate to the Customers Menu:

On the top menu bar, click on the Customers menu.

Step 2. Click on Customer Center:

From the Customers menu, select Customer Center.

Step 3. Locate and Choose the Customer:

In the Customers & Jobs tab, find and select the customer associated with the invoice.

Step 4. Select Received Payments:

In the Transactions section, choose Received Payments from the drop-down menu.

Step 5. Click Twice on the Payment:

Double-click on the payment you want to remove.

Step 6. Click the Delete Button:

At the top of the screen, click the Delete button.

Step 7. Press OK:

Finally, click OK to confirm and remove the payment, leaving the invoice unpaid.

Manually Record a Chargeback in QuickBooks Desktop

You’re suggested to record a chargeback manually as QuickBooks Desktop doesn’t track a refund or chargeback in a single transaction. Moreover, you’re required to make different entries to track the chargeback and the Refund.

You can create a check that affects Accounts Receivable and then set up an expense fee for the chargeback in QuickBooks Desktop. This procedure will bring a positive balance to the customer profile, take out the money from the affected bank, and record the fee for the chargeback.

Follow the steps mentioned below to create a check manually:

1. Navigate to the Banking menu and choose Write Checks. 
2. Now, select the Bank account where the check will get posted. 
3. Then, enter the name of the customer in the Pay to the order of. 
4. After this, type the total amount of the Refund or credit. 
5. Under the section for Memo, type the Credit Memo number. 
6. Go to the Expenses tab. 
7. Choose Accounts Receivable from the Account column. 
8. Now, type the amount of the Refund and then the name of the customer. 
9. Lastly, click the Save and Close button. 

How to Record a Disputed Payment in QuickBooks Online?

To record a disputed payment in QuickBooks Online, either process it as a refund or record it as a business expense. Both methods ensure accurate financial records and account reconciliation.

There are two ways through which you can record a chargeback in QuickBooks Online: 

1. Process the transaction as a refund or 
2. Record the transaction as a business expense

Either way, the disputed payment will be displayed on your bank statement as a separate item.

Follow the steps below to enter a chargeback in QuickBooks Online:

Method 1: Record the Payment as a Refund

Step 1. Open QuickBooks Online:

1. Log into your QuickBooks Online account.
2. To add a new item, go to the left-side navigation menu and select the + New icon.

Step 2. Select Refund Receipt or Give Refund:

Choose Refund Receipt (or Give Refund, depending on the version of QuickBooks Online).

Step 3. Select the customer:

Select the client who is contesting the payment from the drop-down option.

Step 4. Insert the refund receipt date.

In the Refund Receipt Date column, provide the reimbursement date.

Step 5. Provide Sale Details:

In the table, insert information about the product or service that you are refunding, such as the initial sale.

Step 6. Enter the refund amount.

In the amount section, enter the amount you want to repay.

Step 7. Select a payment method:

From the Payment Method drop-down list, choose the credit card used for the original payment.

Step 8. Choose the bank account.

Select the original payment’s bank account from the Refund From drop-down box.

Step 9. Attach the products or services:

Add any customer-returned products to the Product or Service section.

Step 10. Verify and Save:

1. Review the information to confirm everything is correct, then click Save.
2. Optional: To print your refund, navigate to the Credit Card Transaction Status box and click Print.

Step 11. Close the window:

When finished, click the Close tab to exit the page.

Method 2: Record the Transaction as a Business Expense

Step 1. Click the + New Icon:

From the left-side navigation menu, select the + New symbol.

Step 2. Select Expense.

From the menu, select Expense.

Step 3. Select the payee and bank account:

1. In the Payee section, choose the client responsible for the chargeback.
2. Choose the bank account that was used to make the original payment in the Bank Account section.

Step 4. Delete the check number.

Remove the previously entered check number from the field. Optionally, provide a remark to indicate that this is a chargeback.

Step 5. Enter payment information:

Fill out the Payment Account, Date, and Method fields.

Step 6. Uncheck Print Later:

To avoid needless printing, uncheck the Print Later option.

Step 7. Select the Chargeback Account:

1. Enter the entire amount of the chargeback.
2. To save and close, input all required data and click the Save and Close button.

Additional Tip: Perform the Customer Balance Summary Report.

Step 1. Go to the Reports Menu.

On the left menu bar, choose Reports.

Step 2. Select the Customer Balance Summary:

In the search field, type Customer Balance Summary and choose it from the results.

Step 3. View the report.

Examine the report to identify the payments and invoices that comprise each customer’s current overdue amount.

Once done, you also have the option to run the Customer Balance Summary report to get an idea about the payments and invoices that make up every customer’s current outstanding balance. For this, just go to the Reports menu and then choose the Customer Balance Summary report. 

Recording a disputed payment is important to maintain the integrity of financial records statements in businesses. Chargebacks can have a significant impact on the reconciliation of accounts as they make discrepancies in your financial data and might result in refunds, disputes, or unauthorized payments.

Frequently Asked Questions

How Do I Record a Disputed Credit Card Charge in QuickBooks?

To record a disputed credit card charge in QuickBooks:

1. Log in to QuickBooks.
2. From the left-hand menu go to “Banking” > “Enter Credit Card Charges” and input the details.
3. Set up a “Credit Card Disputes” account under Other Current Liabilities.
4. Create a journal entry debiting the “Disputes” account and crediting the credit card account for the disputed amount.
5. Reverse the entry once the dispute is resolved.

How to Fix Disputed Payment in QuickBooks?

Here’s a step-by-step guide on how to fix a disputed payment in QuickBooks:

1. Log in to QuickBooks.
2. From the left-hand menu, click on “Sales“, then “All Sales.” Find the disputed payment.
3. Check the invoice and payment history for errors.
4. If necessary, issue a refund (via “Refund Receipt“) or create a credit memo for future use.
5. For bank chargebacks, adjust your records using the “Make General Journal Entries” feature.
6. Add notes and attach any relevant communication to the transaction.
7. Ensure the adjustment is reflected correctly during reconciliation.

How to enter disputed ACH transaction in QuickBooks?

Follow the step-by-step information given below:

1. Click the +New icon and select Check.
2. Choose the bank account where the check will be issued from.
3. Select the customer who made the original credit card payment.
4. Delete the check number field (optionally, enter a note to indicate that this check is related to a disputed transaction).
5. Enter the total amount that is being disputed and add the relevant item.
6. Add another line item for any charge fees and enter the amount.
7. Ensure the Print Later checkbox is cleared.
8. Choose the account that corresponds to the charge for the transaction.
9. Click Save and Close to complete the transaction.

Disclaimer: The information outlined above for “How to Record a Disputed Payment in QuickBooks Desktop/Online?” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.