Refunds and credits

Two ways to handle money flowing back to the customer: refund the original payment, or apply a credit to a future invoice. Picking the right one matters — refunds cost Stripe fees, credits don't. Customer satisfaction is usually higher with credits than refunds, counterintuitively.

Refund a Stripe payment

Open the Payment record, click Refund in Stripe. Choose full or partial. Stripe handles the money movement; we update our records when the webhook confirms (usually within seconds). The original transaction fee (2.9% + 30¢ for cards) is NOT returned — that's Stripe's standard policy.

Refund timing: card refunds take 5-10 business days to land in the customer's account. ACH refunds take 3-5. Tell the customer the timing up front to avoid 'is the refund coming?' follow-ups.

Apply a credit

On a new invoice, add a negative line item for the credit amount (e.g., -$200 'Goodwill credit for late delivery'). The invoice total reduces by that amount. The credit lives as a line item on the invoice — visible to the customer, auditable later.

For larger credits (more than 10% of an invoice), label them clearly so the customer doesn't get confused. 'Credit for damaged tile during install — pre-negotiated' beats just '-$340'.

When to use which

Refund when the customer wants the money back in hand. Credit when there's more work coming — most customers prefer credit because it's faster and avoids tax-paperwork edge cases (refunds technically reverse the original transaction; credits offset the next one). If the customer is one-time-only and the relationship is ending, refund. If they're a repeat or might be, offer credit first.

Refund scenarios that go badly

The customer disputes the original charge with their card issuer (chargeback) instead of asking for a refund. This costs you the original payment, a $15 dispute fee, AND your time defending it. The fix: respond to refund requests within 24 hours so the customer doesn't escalate to their bank. Most chargebacks happen because the customer tried to reach you and couldn't.

Tax implications

Refunds may require you to update the sales tax already collected. Your bookkeeper or accountant will tell you the right treatment for your state. Credits applied to future invoices generally don't require tax adjustment; the next invoice's tax is calculated on the net (post-credit) amount.