How to account for returned payment to a supplier?


I have a Purchase Invoice from which I have created a Payment Entry.
Now the supplier had change its bank account of, so the funds where returned from the overseas bank (because the bank account the payment was sent to does not exist any longer).

How can I account for this correctly in ERPNext?

I need to ‘reopen’ invoice (which is marked as paid) and also return the funds back on to our outgoing bank account (of course not all of it because both involved banks took a bite from the money).

I was looking at journal entry but can not link that neither to a payment entry, nor to a ‘paid’ Purchase Invoice.

Can anybody kindly advise how to handle such a scenario?

Did you try the Create/Return function? That may handle everything. Just to make sure the return accounts are correct.

If you happen to have the Purchase Invoice created from a Purchase Order then the Order will stand as a different status where you can continue as regular.

Should be straightforward for you if I’m not mistaken about your experience.

If there was a “return” on the payment Entry I’d do that. But the Purchase Invoice itself is not affected by this whatsoever. It needs to remain and to be set back to ‘unpaid’. So from that perspective making a ‘return’ the Invoice is besides what really happens.

Then, this is a pure accounting issue. If you can issue a payment/journal entry as receive from the supplier and another payment entry, it would just be fine. Moreover, you have to do this so thst your accounts reflect all the movements in your bank account.
I’d rather do the returned payment with a journal entry and link that journal entry to the Payment Entry in which you issued the initial payment. If I may know about your Chart of Accounts and settings, I may assist further.

I though about something along those lines. Unfortunately you can not choose a payment entry as reference in a line of a journal entry. What can be chosen is a purchase invoice, but only if it is not paid yet, so this neither is a workable option.

What I practically tried is

line     dr/cr      account             party          Debit     Credit
line 1   credit     payable account     my supplier                1000
line 2   debit      bank account        -              1000

this creates a new liability against the mentioned supplier but does not make the PINV unpaid (which it practically is).

you have to use the “Reference” part of the line 1 where you set the connection to the purchase invoice. This solve the matter

one drawback is … the Invoice shows 2 Payment Entries once you have done the 2nd payment but you don’t necessarily see the connection to the return payment directly.

Also I have seen that if the payment/invoice is in a non-default currency you’ll run into quite some trouble potentially.

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not true. There are references to 2 Payment Entries and also to the Journal Entry in the Invoices Dashboard

Another way to look at this is that since invoice was originally paid - the return of funds and re-sending to another account is a banking matter and has nothing to do with the purchase ledger.

You should follow your strategy of journal entry - show a cash return in bank against the supplier (not linked to any purchase invoice) and then resend funds back to supplier to new account - it will cancel out the liability created. This is purely a banking transaction. You can always add a comment at bottom of purchase invoice / payment entry linking to the second payment - to clarify.

If there are differences in the amounts received back (bank charges) and additional charges for new wire transfer - you can account for those as well during the journal entry. The Debit in bank should match exactly the amount deposited.

Assuming with “Purchase Ledger” you mean the Accounts Payable I am not sure whether I agree.
When the funds are being returned to your bank account the liability that was balanced with the initial payment is re-opened. You owe those funds to the supplier because they did not receive them. So the “Accounts Payable” need to show a liability in the moment the money comes back.

Purchase ledger is the one showing purchases from suppliers. My point is no need to reopen the Purchase Invoice. This is a banking transaction. You can account for it by your journal entry. It does affect the liability to the supplier even as part of the journal entry. Lastly you may want to check if ERP allows you to receive / post payments from a Supplier - as I recall by default it only permits it under certain conditions.