Refunds are often called credits and may be given in cash or some other method. The two most common methods of providing refunds are
- Employee delivered either at time of collection or service
- Check via regular mail to either customer or location manager
When the payment to the account is calculated, refunds are automatically deducted from either the gross revenue or the accounts share depending on the deal.
Handling Refunds properly can save a significant amount of money depending on volume. For example, Two route operators have the same deal with their account, say a typical 50/50 split. They both collect $1,000 from the locations and return say, $100 in refunds. Assuming no taxes, manager fees, adjustments etc., the first route operator doesn't handle the refunds because it's too much work, would pay $500 to the account. The second operator would deduct the refunds as unearned income and pay 50% of $900 which is $450 to the account. Not only did the first operator overpay, their income from the locations is overstated. In the extreme case, if 100% of the amount collected is returned, the first operator would pay $500 and get no income at all.