Reversals and refunds can be similar in that they’re both negative cash and negative net worth transactions. The line between the two is subtle.
On internal financial reports, like a Profit & Loss statement, a Reversed Monetary Contribution will show as a negative on the profit side. In contrast, a Refunded Contribution will show up on the loss side.
Which one do I use?
Reversals are when the Monetary Contribution deposit is not fully completed. An example is an NSF (Non-Sufficient Funds) when a deposited check is returned for insufficient funds.
A Refunded Contribution is when there is separate action taken. For example, your campaign sends the money back to a donor because they have exceeded limits.
How is each reported?
Most commonly, the transactions show the Reversed Monetary Contributions on the Monetary Contribution schedule as a negative and the Refunded Contributions with expenses. However, this will vary per agency, as some have specific schedules for either or both.
How do I add a Refund?
When creating a refund, a separate transaction will be created
- Original transaction: This transaction most likely already exists in your database prior to the need for a refund.
- Refunded transaction: This will be the second transaction created as the refund.
If the original transaction exists in your database, take the following steps to create the refund. If you still need to create the original transaction, please do that before following these steps:
- From either the entity’s record or the Register, click the hotdog menu to the far right of the transaction
- Select Add Refund
- Ensure the populated fields, except for the Date, match the original transaction details
- If the date of the refund is different than the current date, change the Date to match when the refund occurred
- Complete the remaining applicable fields and click Save
A typical example of when you would need to use the refund process: a contribution is deposited into your bank account; then, for various reasons, the donation must be returned to the donor. This is a refund of a Monetary Contribution.
How do I add a Reversal?
A reversal (bounce) is created directly from the original transaction and will automatically be linked to it. The original transaction must already exist in your database. If it has not yet been entered, create it first.
To add a reversal:
- Locate the original transaction.
- Click the hot dog menu (three dots) on the original transaction record.
- Select Reversal (Bounce).
- Enter the reversal date (use the date the transaction bounced).
- Complete any remaining applicable fields and click Save.
The reversal will automatically be linked to the original transaction, making it easy to identify which transaction was returned.
Example: If you deposit a check and later receive notice that it bounced, select Reversal (Bounce) from the hot dog menu on the original transaction since the funds never successfully cleared into your account.
Can I just delete the original transaction?
Please don’t.
Keeping an accurate and complete record of everything that happened is critical for proper bookkeeping. Entering the original Monetary Contribution/Expense and then a Refunded/Reversed Contribution/Expense ensures that you can (a) properly reconcile your bank account, (b) meet legal compliance reporting needs, and (c) have a clear record for future reference.
Keeping an accurate and complete record of everything that happened is critical for proper bookkeeping. Entering the original Monetary Contribution/Expense and then a Refunded/Reversed Contribution/Expense ensures that you can (a) properly reconcile your bank account, (b) meet legal compliance reporting needs, and (c) have a clear record for future reference.
