Sales order refunds for credit card payments

Processing refunds can be a very simple and easy task, a customer returns an item that they do not want and you refund the money they paid for it right? Unfortunately, it’s not quite that simple as you also need to take into consideration partial returns, taxes, discounts, freight, and restocking fees?

There are 3 main areas of Microsoft Dynamics AX that returns are processed through in respect to credit card functionality: Accounts Receivable, Call Center, and MPOS/EPOS. I will be covering some basic scenarios and suggestions on how to process a refund based on the current design of the application.

Optional note: Another refund scenario to consider in place of issuing a straight up refund to a customer’s credit card is to issue an account credit for future orders or a check refund process to track refunds. I have seen both of these being used by businesses, which can help deter fraud returns. The refund terms are normally defined in additional sales agreement verbiage. This also allows for additional return options in AX outside of the credit card processing limitations.

Accounts Receivable (AR):

The design expectation is that you will be creating a Credit Memo/Note from the original Sales Order to perform the return/refund. The credit card functionality in AR is strict that it is expecting a “return of the item” and not just crediting the credit card. This functionality is not included in the Payment journal form nor is it supported to use RMA’s (Return Merchandise Authorization). If you are not returning an item but want to refund a certain dollar amount, a workaround or customization is needed as this is not directly supported through AR.

Below are a few basic scenarios and suggested solutions. There may be other scenarios but this small list will provide you with a basic understanding to help determine a solution for anything not listed below.

• Refunding the entire transaction (Net amount, Charges, and Taxes).
  
  • On the original sales order, click Create Credit note on the Sell menu tab.
  • Select the sales order and the item lines to be returned.
  • All entities (items, charges, taxes) will be included in the refund.
  • Invoice the Credit note sales order to refund the credit card.
• Refunding only a few of the items from the transaction (Net amount, Charges, and/or Taxes).
  
  • On the original sales order, click Create Credit note on the Sell menu tab.
  • Select the sales order and the specific item lines to be returned.
  • The selected items and their associated taxes along with ALL charges will be included in the refund.
  • Make any updates as needed to create a partial refund, such as removing or changing the charges, or changing line items quantities.
  • Invoice the Credit note sales order to refund the credit card.
• Refunding only partial of the net amount (price adjustment).
  
  • In this scenario, you are looking to refund the customer an amount of the sale, not an actual item or any of the charges or taxes.
  • On the original sales order, click Create Credit note on the Sell menu tab.
  • Select the sales order and one of the item lines in order to create the return order.
  • Delete the line item as you are not returning that item.
  • Add a non-inventory item (Price Adjustment) that will need to be used to perform the refund.
  • Make any updates as needed such as removing the charges.
  • Invoice the Credit note sales order to refund the credit card.
• Refunding only certain items.
  
  • On the original sales order, click Create Credit note on the Sell menu tab.
  • Select the sales order and the specific item lines to be returned.
  • The selected items and their associated taxes along with ALL charges will be included in the refund.
  • Make any updates as needed to create a partial refund, such as removing or changing the charges or changing line items quantities.
  • Invoice the Credit note sales order to refund the credit card.
• Refunding only charges/fees.
  
  • You cannot refund charges without returning an item as the Invoice option will not be enabled.
  • On the original sales order, click Create Credit note on the Sell menu tab.
  • Select the sales order and one of the item lines in order to create the return order.
  • Delete the line item as you are not returning that item.
  • Add a non-inventory item (Charges-Fees Refund) that will need to be used to perform the refund.
    • Either use the non-inventory item with a dollar amount for the refund (remove the charges)
    • Or have a zero price for the non-inventory item and the Charges amount will be refunded (recommended)
  • Invoice the Credit note sales order to refund the credit card.
• Refunding only Taxes.
  
  • Taxes are not line items nor are they normally refunded without the item. The design of sales orders does not support the direct refund of just the tax to the credit card. Thus performing any reversal not involving the return of the item does not affect any tax posting accounts.
  • On the original sales order, click Create Credit note on the Sell menu tab.
  • Select the sales order and one of the item lines in order to create the return order.
  • Delete the line item as you are not returning that item.
  • Add a non-inventory item (Tax Refund) that will need to be used to perform the refund and enter the amount of the tax refund.
  • Invoice the Credit note sales order to refund the credit card.

Call Center:

The credit card functionality in Call center can be used similar to that of AR. The only difference is the addition of the Complete and Payment buttons to submit the payment. When the “Enable order completion” option is marked in the Call center channel, these option will become available on the Sales Order.

Call Center does add a feature called “Order credit” to the Sales order form. Using this button, you can perform standalone credits to the customer from the Invoiced order (it must have at least 1 invoiced line) without having to return an item or create a credit note. You would just simply enter the amount of the credit with a reason code and post it. The 2 biggest drawbacks to utilizing this workflow is that this credit will not be directly associated to the sales order, and that the posting will only affect the Customer Account offset by the Offset account listed for the Journal specified in the Call center parameters. It is strongly recommended to test this workflow to ensure it meets your posting needs prior to use.

• Refunding Misc using Order credit.
  
  • On the original sales order after invoicing part or all of the order, click Order credit in the Sales order menu tab.
  • Enter the amount of the credit with a Reason code, click OK to process the refund the credit card.
    • If Credit type defaults to Account credit, uncheck the option at the bottom for Credit to account.
    • This option can be changed in the Call center parameters in the Payment section.
• Refunding only Taxes/Charges.
  
  • On the original sales order after invoicing part or all of the order, click Order credit in the Sales order menu tab.
  • Enter the amount of the credit.
  • Select a Reason code for Charge Refund or Tax Refund.
  • Click OK to process the refund to the credit card.

EPOS/MPOS:

The credit card functionality in POS is dependent on the previous sale. In order to process a refund to a credit card, you can either use the Return Transaction or Return Product function. The main difference in this functionality is that the Return Product doesn’t care about the customer and will use the current discounts and offers, whereas the Return Transaction uses all of the original information from the recalled transaction. When dealing with a lot of discounts and returns, it is recommended to utilize Return Transaction.

• Return Transaction requires a receipt and can use any credit card for refunding the payment. If you would like to use the same card, this would be a process of the cashier verifying the last 4 digits of the card number on the receipt with the card being used for the return.
• Return Product can return any item and use any credit card for refunding the payment.

Here are a few scenarios and suggested solution based on the Return Transaction functionality:

• How to refund the original Full amount (Net amount, Charges and Taxes)
  
  • Use the Return Transaction function to recall the original transaction (either from a customer receipt or Show journal).
    
  • Select all items for return
  • Perform all entities will be included in refund
    
  • Swipe the Credit card via hardware or click Credit card to manually enter the card info to process the refund.
    
• Refunding only certain items from the original transaction.
  
  • Use the Return Transaction function to recall the original transaction (either from a customer receipt or Show journal).
    
  • Select only the items needing an adjustment.
  • Swipe the Credit card via hardware or click Credit card to manually enter the card info to process the refund.
    
• Refunding a partial amount of an item from the original net amount (price adjustment).
  
  • In this scenario, you are looking to refund the customer an amount of the sale, not an actual item or any of the charges or taxes. There are two ways to accomplish this, either add a non-inventory item to the sale for a courtesy credit, or return and resell the item at the correct price.
  • Use the Return Transaction function to recall the original transaction (either from a customer receipt or Show journal).
    
  • Select only the items needing an adjustment.
  • Two options:
    • Return the item with the full original amount and then resell the item at the correct price. (recommended)
    • Add a non-inventory item (Price Adjustment) that will need to be used to perform the refund.
  • Swipe the Credit card via hardware or click Credit card to manually enter the card info to process the refund.
    
• Refunding Misc credits.
  
  • You cannot refund charges, taxes, or fees directly. The best way to perform this is to add a non-inventory item to the sale for the credit.
  • Click Return Product
  • Add a non-inventory item (Misc Credit) that will need to be used to perform the refund with a prompt to enter a dollar amount.
  • Swipe the Credit card via hardware or click the Credit card tender to manually enter the card info to process the refund.