Reverse a vendor payment

9 minutes

Occasionally, after you post a vendor payment, you need to reverse it. 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 been generated yet. This limitation always applies, regardless of the payment method.

You can void unposted checks after they generate but before they're 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. You can regenerate a voided or rejected payment after the Payment status value changes back to None.

You can't reverse payments that are made electronically after they're posted. Instead, you must create a new transaction in the amount of the payment to get the liability back on the vendor's account.

Reverse posted checks

Two methods for reversing posted checks are:

The system immediately posts reversals when you select Payment reversal on the Check page.
When you select Payment reversal on the Check page, the system sends the reversal to the Check reversal journal in the Cash and bank management module, where a reviewer can 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, the system sends reversals 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:

Select Payment reversal on the Checks page.
On the Cash and bank management parameters page, set the Use review process for payment reversals option to No.
On the Checks page, select the check to reverse and then select Payment reversal.
Enter the date and then select a reason for the reversal.

Reverse posted checks after reviewing them in the Check reversal journal

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

Create a check reversal journal for review.
On the Cash and bank management parameters page, set the Use review process for payment reversals option to Yes.
On the Checks page, select the check to reverse, and then select Payment reversal.
Enter the date, and then select a reason for the reversal.
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 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 select Lines. You can review the reversed check, and then select one of the following approval options:

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

If you delete the journal, the system removes the reversal, 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 updates to Cancellation.
If you select the Reconcile option on the reversal page during the reversal, the system reconciles the check (the Reconciled option is selected) and then the check doesn't appear on the Account reconciliation page.
The system posts the reversal voucher against the bank account from which the check was issued to increase the bank account balance.
The system posts the voucher to General ledger.
The modification details update in the History field group on the Check page.

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

The system unapplies (reverses the settlement) the original payment from the invoice that the payment was settled against.
The system posts a transaction against the vendor account for the payment reversal, and then it settles the reversed payment against the original payment. The Last settlement voucher field on the Vendor transactions page for the original vendor disbursement updates to reflect the voucher number of the reversed transaction.

If you issue the reversed check for a customer refund, the following events also occur: