A technician has just finished a job. However, the card they swiped was processed for $340 instead of $240. The customer noticed the error before the van left the driveway. What happens next depends on whether or not the charge has settled. Field teams typically reach for refunds as the “polite fix,” but this is rarely the quickest or most efficient route.

Voiding, refunding, and addressing the underlying issue on the invoice resolve three separate issues. If refunding and voiding are mixed, then errors and duplicate charges occur, as well as a balance discrepancy for both the field teams and the customer. This article lists on-site payment mistakes and will go over when it is appropriate to void, when to refund, and the instances where the issue is best resolved by correcting the invoice in question and not the payment.

The Three On-Site Payment Mistakes Techs Actually Make

Most errors that occur on site are from three different sources, and corrective action will depend on the mistake that was made. The first mistake is a keying mistake. This typically occurs when the technician double-enters a line item or shifts the decimal. The technician enters $340 for a work order that states $240. The second mistake is a correct total that is assigned to the wrong account. This occurs when the amount charged is correct, but it was entered for the wrong customer or job number.

The last mistake is a double charge. The card reader appears to freeze, and the technician goes ahead and taps the card again. From a customer’s perspective, there are wrong numbers on the screen, but the fix that needs to be done on an operational level is different each time. Understanding which mistake was made determines what action can be taken, whether it is a void, refund, or invoice edit.

Void vs Refund: The Settlement Line That Decides It

Every payment transaction undergoes two processes. The first process is authorization. The card can be tapped or dipped and the funds are placed on hold by the bank. The bank also sends an approval code, but at this stage no funds are taken or transferred. The second main process is settlement. This is the process that involves fund transfer. As the name suggests, settlement happens when a processor closes its batch. Here, the funds are moved from the customer to the merchant. A cancel or void transaction occurs during the first stage when the batch is still open.

Nothing has moved, and therefore there is nothing to reverse. The hold is lifted, and the transaction does not post on the customer’s account or the bank statement. A refund pays the customer, but only after the settlement is done. This is after the funds are moved and the transaction is closed. A refund does not cancel the original transaction. A refund is a new transaction that pays the customer a full or partial transaction amount.

Visa and Mastercard

Card networks differentiate between voids and refunds in their message types. Visa and Mastercard each type them differently. Issuing banks treat the message types differently on the cardholder statement. A voided authorization drops off after a few business days as an authorized but never posted charge. A refund is processed as a separate transaction and can take anywhere from 3 to 7 business days for the funds to be made available to the customer. Processors charge different rates for voids and refunds. A voided transaction avoids the settlement and refund fee, but with a refund the merchant still pays the processing fees on the original charge.

Example timeline of typical void windows and post-refund windows for a typical processor. Actual time periods for cutoffs differ for each processor and card network.

When the Invoice Is Wrong vs the Charge Is Wrong

Not all mistakes in pricing are mistakes in payments. For instance, just because a card charge occurs for the full amount in an invoice, that invoice may still contain errors (for service codes, discounts, or incorrectly priced parts). Voiding or refunding the payment would be the wrong remedy in this case. The technician would be responsible for correcting the invoice and then making the determination as to whether the payment should be made for the corrected amount. If the corrected amount is less than the original payment, then the technician would be obligated to refund the difference to the customer because the original payment was made for the incorrect amount.

If the corrected amount is greater than the original payment, then the technician would be required to obtain authorization for that amount. In this case, it would not be appropriate to issue a void. The other case is a payment error for which the invoice is correct. In this case, the documentation was correct, and the card transaction was the error. Knowing the difference in these two cases would provide the technician with the remedy and avoid reversing a payment that did not need to be reversed.

Correcting On-Site without a Second Trip

The best solution is the one provided to the technician before they leave the property. Within the void window, this solution will take only a few seconds. First, cancel the original authorization. Next, verify the corrected total with the customer. Finally, run a fresh charge for the corrected total. In this case, there is no need to make a refund and the customer does not have to watch their statement for a credit a few days after the transaction.

Unfortunately, there is no way to void a payment after the batch has closed and the payment has been settled. In that case, the best solution is to make a refund in the field and correct the original total. This should be done in the correct order. The original total should be corrected in the invoice record. Once that is done, the payment should be voided (if still possible), and either refunded or charged, if required.

The biggest curveball a technician has to deal with is timing. The field crew has no control over batch cutoffs. This is the choice the processor makes. A job that is completed in the morning has hours to spare before the batch settles and allows a clean void if the mistake is noticed before the technician leaves for the day.

Jobs closed late in the day have a short window, so mistakes discovered an hour after a job is closed can be on the other side of settlement. Teams that develop the habit of having the customer confirm the amount verbally before the card is processed largely avoid this waiting game.

What the Customer Sees for Each Correction Type

Customers judge the correction by what shows up on their statements. A void is the best outcome a company can have. A void at most will cause a brief pending charge in the bank account, and that charge will disappear before a transaction is posted. Most customers will not see a void happen. With a refund, the original charge still posts to the card, and if a support request is made relating to the refund, then that refund was not adequately explained. The original charge is posted to the credit card, and a few days later, the credit is posted as a second entry.

Customers see two entries instead of one. Even though the credit total equals the charge total, customers will interpret this as a company error. If the service technician explains this, or if the company sends a follow-up message to the customer, then the customer will understand that this was not an error. An invoice correction that does not change the payment balance is not posted to the credit card, and will not show on a credit card statement, because the record was only updated. Informing a customer of the result of a service call and whether the customer will see a void, refund, or nothing will prevent the customer support call that comes two or three days later when the credit card statement posts.

This example distribution illustrates the categories of mistakes described in this article. These categories were not drawn from a published survey.

Field Permissions: Who Can Void or Refund

Not all roles on a field team should have the same rights to correct payments. Technicians cannot be given unlimited refund authority as it creates a system that’s easier to exploit even for honest mistakes. At the other extreme, requiring every correction to go through the back-office approval process significantly delays a correction that should take a couple of seconds at most. Most field service operations sit somewhere in the middle.

Most field technicians are granted permission to void same-day transactions, often on their own devices, as the risk is significantly reduced and the correction is instant. Refunds, partial or full, are restricted by several factors including a supervisor login, a threshold, or a reason code, as that money has already been moved and has a high risk of error and thus should be reviewed.

HMS Pay

Role-based access controls at the payment processing level make it possible to split up payment authority rather than relying on policy alone. HMS Pay provides permission tiers that separate void authority from refund authority at the device level, allowing a technician’s login to make an on-site correction without the ability to issue refunds from the field. Additionally, every void and refund has an audit trail associated with the user who initiated it, which is useful when a supervisor is reconciling the day’s corrections against the batch.

Keeping Invoice and Payment Records Linked

A correction touches both the invoice and the payment record. If the payment is voided or refunded in the payment system and not noted on the invoice, the office is left with two different records. The accounting side will reflect one amount, while the job record will reflect a different amount. This discrepancy is usually discovered during a reconciliation. Someone will have to remember or will have to call to find out what happened on the job and what has been logged. The solution is simple, although not automated.

Every void, refund, or edit of an invoice should be documented, with the original transaction and explanation of the change. While field apps time-stamp corrections against the source invoice, a manual fix can be done by using an internal reference number. Should a customer dispute a charge, having connected records with matching timestamps helps a lot.

This becomes especially relevant for teams running many technicians on the same merchant account due to the implications of corrections logged under the wrong job number. An incorrect job number can cause issues with that merchant account during the monthly account reconciliation. Staff doing daily batch reconciliations should be able to match logged corrections against pending and settled invoices.

In the event that the described controls are absent, an overcharge that is subsequently refunded to the client would result in the accounting staff having to review the account in an unproductive manner.

A Quick Decision Guide for the Field

To know the correct approach, you must answer the following questions in order: has the transaction settled and is the invoice correct? The chart that follows shows the common scenarios and the appropriate next step.

Conclusion

Voiding and refunding have distinct differences and will not solve bad invoices on their own. The line around which the decision is made is whether the transaction has settled. Before that, voiding is faster, less costly, and completely unnoticeable to the customer. After that line, the only available option is refunding, and that should be explained to the customer in detail since two entries will appear rather than one. In addition to that, there is the question of whether the invoice was ever correct.

Bad pricing, for example, cannot be corrected by a payment adjustment. Clear field permissions, a strong link between the records for the invoice and payment, and a commitment to fixing the documentation before swiping the card a second time keep errors occurring on the site from becoming support tickets or disputes several weeks later.

FAQs

Related reading on fixing on-site payment mistakes: Contractor Payment Resources.

A contractor examines the bank feed for Tuesday at 9:00 am. There is a single ACH payment credit posted overnight. The amount doesn’t match any of the invoices. It is a combined payment from a commercial customer who paid for five separate work orders, all at once. The contractor will not see any invoice numbers for these transactions.

This is just the nature of dealing with general contractor, facilities, and property manager accounts. They will combine payables and send a single wire or ACH payment credit to pay for numerous work orders. The contractor needs to learn how to convert this one credit into five completed work orders.

The Lump-Sum ACH Problem for Contractors

When a property management firm consolidates a bunch of work orders into one invoice, a field service contractor would see a sizable lump-sum payment appear in their account. However, in the background, there could be dozens of work orders. Each work order would have its own invoice with specific line items and a separate due date.

If the payment amount happens to match one of the line items exactly, it is easy to reconcile the payment. However, the payment could be for multiple other line items which could be outstanding. The main problem is not receiving the payment, but proving which work orders the payment closed.

Field service contracting and trade contracting generally have the same issue. General contractors tend to batch payments to subcontractors once per month. Property managers consolidate payments to maintenance vendors into one payables run based on the cycle for owner disbursements. Facilities accounts tend to run payables on a fixed schedule every week or every other week. These come as no surprise to field service contractors.

They simply understand how the accounts payable system of commercial clients works. It is common for invoices to be consolidated. The contractors that are able to smoothly reconcile payments are the contractors that created a matching process before the payments started.

Capturing Remittance Detail at the Point of Payment

The fix begins before payment is made. Remittance detail is the information the payer includes with the payment that describes which invoices the payment covers. When a payer includes this information with a payment, the deposit reconciles itself. When this detail is missing, someone on the contractor’s team must perform after-the-fact reconstruction and typically compares payment amounts to open job costs, hoping that the math only results in one answer.

Nacha CCD and CTX Formats

ACH credits and debits for corporate customers, called CCD, can carry one addenda record to include payment-related information. The addenda record provides an 80-character field that can include an invoice number, but not much else. For this use case, a CTX, or Corporate Trade Exchange, was designed. CTX can carry thousands of addenda records per payment and can therefore include payment detail for each invoice as an ANSI X12 820 remittance advice.

Contractors that invoice commercial accounts frequently should check with their customer’s accounts payable whether they use CTX. A CTX-capable payer can include five invoice numbers in a single ACH transaction. A CCD-only payer cannot do this, and a contractor would have to look elsewhere to obtain the detail.

Splitting One Payment across Open Invoices Accurately

After the contractor obtains the remittance detail, splitting the deposit is simple; it is no longer guesswork. The contractor will list all open invoices for that customer, then line up remittance detail with the invoice numbers, and apply the payment amount to each until the total is the same as the deposit. A short example might help to show the pattern.

In this situation, an ACH deposit exactly equals five separate job invoices for a single commercial customer. The remittance detail described the amounts and attached the corresponding invoice numbers. The contractor’s bookkeeper used the detail to post to the individual job files, which closed those files. Without that description, a single deposit could be used to overpay a large job invoice, misapply funds to multiple small job invoices, or be used to underpay all remaining invoices.

Separate invoice numbers should always be used to post a single lump payment. A single payment that is posted to a customer’s balance as a lump payment may bring a customer’s account balance to an even amount; however, this loss of detail eliminates the relationship between payments and specific invoices, which is crucial for a contractor in the future, especially if an invoice-related dispute arises. The simplification of splitting postings for individual job files that is made possible by accounting software becomes even more beneficial when remittance detail is available since entering the amount and the invoice number may be done as a single entry for multiple invoices instead of individually.

When Remittance Detail Is Missing Entirely

Sending clean digital invoice data is not a given for every customer. For some, accounts payable systems strip remittance detail before the funds are transferred. Some customers still pay by lump-sum ACH but only mail a payment spreadsheet, if they send anything at all. An accounting system will process the payment, but the funds will be registered as unapplied cash. This means the funds have been received but cannot be matched to a particular invoice and are then held in a suspense account. If the payment addendum is not filled out, the cash will remain unapplied. For these instances, the job records provided by the contractor are used to determine the best possible match.

Matching the payment amount with various customer invoice balances that include either a purchase order number or job site address will often lead to the best possible match. There may, however, be instances where the best possible match is not obvious. The most effective way to determine a remittance for these situations is for the accounts payable contact to be reached for a remittance breakdown. Money is typically posted against invoices when the correct remittance is not available. These posts then result in a credit balance that has no explanation.

It is not a mistake to hold an unmatched deposit in suspense. It is actually the prudent course of action versus making an incorrect guess. A suspense account establishes control over the receipt of cash, and ensures that it has not yet been assigned to an account, giving a contractor protection against the two worst-case outcomes. Those outcomes involve the contractor reporting cash that has not been invoiced or, worse, closing a real balance by invoicing an incorrect due amount.

Failing to act to clear a balance in suspense means that a contractor should expect to eventually lose control over a real cash balance. Eventually, no one will be “actively working” the deposit. Deposits that sit unaddressed for extended periods of time will make it more difficult for contractors to identify the reason for that cash deposit.

Keeping Job Records and Accounting in Sync

Ideally, a system should be built to track jobs and to track money in accounting; however, job management systems and accounting systems are built to work in parallel. When a job is finally closed, the accounting system shows a payment received; whereas, in the job management system, it shows a work order that is complete and invoiced.

Disconnected systems lead to issues. For example, a job may appear as completed in a job management system, but if that work order invoice is still open in accounting, then you have an issue in the system. The best method is to post job payments to accounting before you update the job status in your work management system to ensure the backwards integration from accounting status to closed job is complete.

HMS Pay

Some payment platforms that support commercial ACH origination differ in the detail of remittance information they pass to the contractor. HMS Pay is designed to carry structured remittance data with commercial ACH transactions. As a result, when a contractor receives a batched payment, they can see the invoice-level details along with the payment deposit.

This is not a reminder to do an accounting exercise. Rather, the detail flows directly to the reconciliation workflow. This shortens the “closure gap,” the duration between the payment deposit and the closing of each invoice.

Avoiding the Dunning-a-Paid-Customer Mistake

The most harmful error that can occur with reconciliations is not missing a payment. It is ‘dunning’ a customer that already made a payment. Suppose a client makes a lump-sum payment to satisfy multiple invoices. However, the payment gets posted to only one of the five invoices because the remittance detail was either ignored or misunderstood.

In this case, the accounting system reflects that four invoices are still open. As a result, a reminder or a collection call will be made for work that has been settled. For a business account, particularly a property manager or a general contractor who sends this contractor business continuously, this error will damage the business relationship much more than a slow payment would. The accounts receivable (A/R) report will likely show the error since an invoice that should have been closed will continue to age.

The chart illustrates how accounts receivable normally ages for non-collected payments, and it demonstrates how the error snowballs. From a process standpoint, there is no difference between an invoice that is unpaid and an invoice for which payment details were not entered, and so the invoice is not marked as paid. It is processed as if it had not been paid, so it is at the same risk of being written off as an unpaid account, even though payment was processed well before.

Invoice Numbering That Makes Matching Easier

Using invoice numbers that facilitate matching is a key differentiator amongst invoicing software. Vague numbers such as invoice 1042 do not provide any help to the payer when posted on the remittance line with a corresponding dollar figure. Using a number that includes the job address, property information, customer account, etc. helps the contractor and the accounts payable team on the customer’s side frame a remittance detail even when the remaining information is sparse.

Many contractors put the purchase order number on the invoice header since purchase order numbers are usually the field a commercial payer’s system uses to key its remittance file. The goal is not a clever numbering scheme. The goal is a number that survives being copied into an 80-character addenda field or a hand-typed email without losing its meaning.

A Reconciliation Routine for Commercial Accounts

ACH payment deposits need to have accompanying remittance detail, or else a request needs to be sent to the payer’s accounts payable. The routine for billing contractors is to check if remittance detail for each ACH payment was provided on the day the payment clears. The accounts payable department is then contacted to explain why the deposit was made, and the status of the jobs is not updated until after the accounting split is finalized.

There is a weekly review of aging reports looking for invoices for customers that batch their payments to ensure that those customers do not have any unmatched payments. This routine takes a couple of extra minutes for each payment and is much cheaper than having to find a misapplied payment across multiple jobs. It is also a lot less embarrassing than having to call a customer and explain why an invoice that was already paid was chased.

Assigning responsibility for this process to a single person is as important as the process itself. Reconciliation as a team effort can lead to each person leaving their deposit for a little longer while thinking someone else will do the reconciling. Little delays in a busy month can add up. A single person, whether it is the office manager, bookkeeper, or contractor for a smaller shop, should check every single business deposit each day.

With this focus, a pattern emerges regarding which customers batch payments, which always give clean remittance, and which customers always need to be reminded to include invoices. From that pattern, the process for reconciling becomes easier and more automatic.

Conclusion

Dealing with a single ACH deposit covering five invoices is not challenging. The challenge is in establishing a system to capture remittance and payment details at the point of payment and establish job records that reconcile with the accounting ledgers. Simply put, capturing remittances for payment and matching the job records and the accounting ledger is the actual challenge where contractors spend the majority of their time.

In contrast, contractors that have integrated payment, remittance capture, and reconciliation as part of one system spend more time closing files and less time following up on paid jobs.

For more on matching ACH remittance to open jobs and other contractor payment questions, see Contractor Payment Resources.

Frequently Asked Questions