Reverse a vendor payment

  • 5 minutes

Occasionally, after a vendor payment has been posted, the payment must be reversed. Reversal differs from deleting, voiding, or rejecting a payment.

You can delete a payment only if its status is Created. This status indicates that the payment has been created but hasn't yet been generated. This limitation always applies, regardless of the payment method.

You can void unposted checks after they have been generated but before they have been posted. If the generated payment is done as an electronic fund transfer (EFT), you can reject the payment before it's posted.

To reject a payment, change the Payment status value in Accounts payable > Payments > Vendor payment journal > Lines. A payment that has been voided or rejected can be regenerated after the Payment status value is changed back to None.

Payments that are made electronically can't be reversed after they have been posted. Instead, a new transaction must be created in the amount of the payment to get the liability back on the vendor's account.

Reverse posted checks

There are two methods for reversing posted checks.

In one method, reversals are posted immediately when you click Payment reversal on the Check page.

In the other method, when you click Payment reversal on the Check page, the reversal is sent to the Check reversal journal in the Cash and bank management module, where a reviewer can then post or reject the reversal.

To learn which method your organization uses, view the Cash and bank management parameters page. If the Use review process for payment reversals option is set to Yes, reversals are sent to the check reversal journal for review.

Reverse posted checks without reviewing them

If your organization wants to post check reversals immediately without reviewing them, follow this procedure:

  1. Click Payment reversal on the Checks page.
  2. On the Cash and bank management parameters page, set the Use review process for payment reversals option to No.
  3. On the Checks page, you can select the check to reverse and then select Payment reversal.
  4. You can then enter the date and select a reason for the reversal.

Reverse posted checks after they are reviewed in the Check reversal journal

If your organization wants to review check reversals before they are posted, follow this procedure:

  1. Create a check reversal journal for review.
  2. On the Cash and bank management parameters page set the Use review process for payment reversals option to Yes.
  3. On the Checks page, select the check to reverse, and then select Payment reversal.
  4. Enter the date, and then select a reason for the reversal.
  5. Select a journal name to create a journal in the check reversal journal.

Review a reversal

If you're a user who must review reversals, you can either approve and post the journal or reject the reversal by deleting the journal. On the Check reversals journal page, select the reversal journal to review, and then click Lines. You can review the reversed check, and then select one of the following approval options:

  • To approve and post the reversal journal, click Post or Post and transfer.
  • To reject the reversal, delete the reversal check journal.

If you delete the journal, the reversal is removed from the system, but the original check remains on the Check page. The status of the check is no longer Pending cancellation.

Results of posting a reversal

When you post a check reversal, the following events occur:

  • The check status is updated to Cancellation.
  • If the Reconcile option was selected on the reversal page during the reversal, the check is reconciled (the Reconciled option is selected) and doesn't appear on the Account reconciliation page.
  • The reversal voucher is posted against the bank account from which the check was issued to increase the bank account balance.
  • The voucher is posted to General ledger.
  • The modification details are updated in the History field group on the Check page.

When you reverse a check that was issued for an intercompany trade transaction, the offsetting entries come from the accounting setup for intercompany trade, not from the original transaction. If the check that was reversed was issued for a vendor payment, the following events also occur:

  • The original payment from the invoice that the payment was settled against is unapplied (the settlement is reversed).
  • A transaction is posted against the vendor account for the payment reversal, and the reversed payment is settled against the original payment. The Last settlement voucher field on the Vendor transactions page for the original vendor disbursement is updated to reflect the voucher number of the reversed transaction.

If the check that was reversed was issued for a customer refund, the following events also occur:

  • A transaction is posted against the customer account for the payment reversal, and the settlement between the original payment and the document that the payment was originally settled against is reversed (a negative payment is created).
  • A payment reversal is applied to the original payment. The Last settlement voucher field on the Customer transactions page for the original customer payment is updated to reflect the voucher number of the reversed transaction.