How to process a refund: a clear process for online payments

Knowing how to process a refund properly matters more than most businesses expect. A refund handled quickly and clearly keeps a customer; a refund that disappears into email threads turns into a chargeback, a complaint or a bad review. And on the finance side, a refund that isn't recorded against the original payment leaves your books, your VAT and your customer's balance wrong.

This guide sets out a simple refund process that works for card, instant EFT, EFT and debit order payments, and the records to keep so that every refund can be explained later.

Decide your refund policy first

A refund process can only be as clear as the policy behind it. Write down:

• When you refund (faulty goods, cancelled services, unused periods, goodwill) and when you offer a replacement or credit instead.
• Time limits for requesting a refund.
• Full or partial refunds, for example for a subscription cancelled mid-period.
• Who can approve refunds, and up to what amount.
• How long the customer should expect to wait.

South African consumers have specific rights under the Consumer Protection Act and, for many online purchases, the Electronic Communications and Transactions Act. Your policy can't take those rights away, so have it checked by someone who knows consumer law. Our article on credit notes vs refunds covers when a refund is the right tool in the first place.

The refund process, step by step

1. Find the original payment

Every refund should start from the payment being refunded, not from the customer's description of it. Look it up by its reference, confirm the amount, date and payment method, and check how much has already been refunded. This prevents refunding the wrong payment or refunding twice.

2. Check the request against your policy

Is the request within your time limit? Is it a full or partial refund? Does it need approval? If you're declining, say why and offer the alternative your policy allows.

3. Refund to the original payment method

Refund the same way the customer paid, to the same card or account. This is the single most important fraud control in the whole process. A request to refund "to a different account" is a classic scam pattern: the fraudster pays with stolen details, asks for a refund elsewhere, and the real cardholder later disputes the original payment. Our guide to EFT proof of payment explains a similar trick with fake proofs of payment.

4. Issue the refund through the right channel

How the money goes back depends on how it came in:

5. Record the refund against the payment

Record the amount, date, reason, who approved it and the gateway's refund reference against the original payment. The payment should then show as refunded or partially refunded, and the invoice balance should update.

6. Issue the right document

If the original payment had a VAT invoice and you're VAT registered, a refund usually needs a credit note to reverse the VAT, not just a bank transaction. Send the customer a refund confirmation either way, so they know what to expect and when.

7. Update your accounting

Post the refund in your accounting system against the original sale and payment, so revenue, VAT and the customer's balance are all correct. If you sync payments automatically, check that refunds sync too.

Partial refunds

Partial refunds are common: one item from an order, part of a subscription period, or a goodwill gesture for poor service. Keep them traceable:

• Refund against the specific payment, never as a "credit" floating on the account.
• Note what the partial refund covers ("2 of 5 seats, September").
• Make sure the total of refunds can never exceed the original payment.
• Issue a credit note for the refunded portion if VAT was charged.

For subscriptions, a mid-period refund usually follows the same arithmetic as proration. Subscription proration explained has worked rand examples.

Communicating with the customer

Most refund complaints are about silence, not money. Tell the customer:

• That you've received the request and when they'll hear back.
• Whether it's approved, and the amount.
• How and when the money will reach them, and that card refunds can take some days to reflect.
• The refund reference, so their bank can trace it if needed.

Controls that keep refunds safe

• Limit who can issue refunds. Refunds move money out of the business, so treat the permission like a signing limit. Our guide to role-based access control shows how to set this up.
• Separate request and approval for larger refunds.
• Review refunds regularly: by person, by customer and by reason. Unusual patterns, such as many refunds by one staff member or to one customer, deserve a look.
• Prevent duplicates with unique references and, for API integrations, idempotency keys.
• Keep an audit trail of who recorded each refund and when.

How CentraPoint helps

In CentraPoint you issue the refund in your gateway's merchant dashboard first, then record it against the original payment: the amount (up to what is still refundable), the reason and the gateway's refund reference. CentraPoint then marks the payment refunded or partially refunded, updates the linked invoice's balance, generates a branded refund note PDF with its own number, and sends a payment.refunded or payment.partially_refunded webhook to your systems. Refunds sync to Xero, Sage, QuickBooks and Zoho Books with your other payments.

Issuing refunds is limited to admins by default and can be granted through custom roles, and refunds are recorded in the audit log. Developers can record refunds through the API with an idempotency key, so a retried request never records the same refund twice. See the receipts and refunds documentation.

Frequently asked questions

How long does a card refund take in South Africa?

The gateway usually processes it quickly, but it can take several business days to appear on the cardholder's statement, depending on their bank. Give the customer the refund reference so their bank can trace it.

Can I refund a card payment to a bank account instead?

It's best not to. Refunding to a different method or account is a common fraud pattern and can leave you exposed if the original payment is later disputed. Refund to the original card wherever possible.

Do I need a credit note for a refund?

If you're VAT registered and the original sale had a tax invoice, a credit note is usually needed to adjust the VAT. Check with your accountant for your situation.

What's the difference between a refund and a chargeback?

You choose to give a refund. A chargeback is forced by the customer's bank after a dispute, usually with a fee. Prompt refunds prevent many chargebacks; see chargebacks in South Africa.