What Are Reversals and Refunds & How Do I Add Them?
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?
Similar to the refund, the reversal will also create a second transaction:
- Original transaction: This transaction most likely already exists in your database prior to the need for a reversal.
- Reversed transaction: This will be the second transaction created as the reversal.
Again, if the original transaction already exists in your database, take the following steps to create the reversal. If the original transaction has not yet been created, please do so before taking the steps below.
- Create a new transaction from the entity’s record, the Register, or the Add Transaction option under the Accounting tab
- Match the details of the original transaction except for the Date
- In the Date field, use the date of the reversal
- Click the Is Reversal box towards the top
- Complete the remaining applicable fields and click Save
An example of when you would use a reversal is if, after you deposit a check into your account, you receive a notification the check bounced. This becomes a reversal situation since the funds never truly hit 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.
