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Handling Refunds and Cancellations

10 minutes

Tutorial 8.2: Handling Refunds and Cancellations

Introduction

Even in the best-run salons, situations arise requiring refunds - unhappy customers, service errors, incorrect charges, or cancellations after payment. Processing refunds correctly protects your financial records, maintains customer trust, and ensures accurate reporting. This tutorial covers the complete refund process, permissions required, and the crucial difference between refunds and cancellations.

Who this is for: Owners, Admins, and Managers who handle customer complaints and financial corrections.

What you'll learn:

  • When to issue refunds vs cancellations
  • Processing refunds
  • Permission requirements for refunds
  • How refunds affect stock and reports
  • Cancelling pending transactions

Time to complete: 10 minutes

Prerequisites

Before you begin:

  • You must be logged in as an Owner, Admin, or Manager (Staff and Receptionists cannot process refunds)
  • Managers have the refund-transactions permission and can process refunds
  • Complete Tutorial 8.1 (Understanding Transactions and Payment Status)
  • The transaction you want to refund must be completed

Step-by-Step Instructions

Step 1: Understanding Refunds vs Cancellations

Refund: Reversing a completed transaction after money has been exchanged.

Characteristic Details
Original transaction Completed and counted in revenue
Timing After payment processed
Financial impact Revenue recorded then subtracted
Stock impact Products returned to inventory
Who can do it Owners, Admins, and Managers

Cancellation: Voiding a pending transaction before completion.

Characteristic Details
Original transaction Never completed, no revenue recorded
Timing Before payment finalised
Financial impact No revenue impact
Stock impact No stock change (never decremented)
Who can do it Most roles can cancel pending transactions

Decision tree:

Transaction completed?
    ├─ No → Cancel the transaction (Step 2)
    └─ Yes → Process refund (Step 3+)

Step 2: Cancelling a Pending Transaction

If the transaction hasn't been completed yet:

  1. Navigate to POS in the sidebar
  2. Find the pending transaction in the list (use status filter: Pending if needed)
  3. Click to open the transaction details page
  4. Click the Cancel button (with X icon) in the header
  5. A confirmation dialog appears - review the transaction details shown
  6. Click Cancel Transaction to confirm

What happens:

  • Transaction preserved for audit trail with "Cancelled" status
  • Never counted in revenue (was never completed)
  • Cannot be uncancelled (create new transaction if needed)

Common scenarios:

  • Duplicate transaction created by mistake
  • Customer changed mind before payment
  • Abandoned Quick POS session
  • Incorrect customer selected

Step 3: Checking Refund Permissions

Owners, Admins, and Managers can process refunds.

If you're a Staff member or Receptionist:

  1. Note the transaction number
  2. Note the refund reason
  3. Contact your Manager, Admin, or Owner
  4. They'll process the refund

Permission check:

  • Navigate to a completed transaction
  • If you see the Refund button in the header → you have permission
  • If you don't see the Refund button → you don't have permission; contact your Manager, Admin, or Owner

Step 4: Locating the Transaction to Refund

From the POS page:

  1. Navigate to POS in the sidebar
  2. Use the filters to find the transaction:
    • Search by transaction number (e.g., "TXN-20260120-0001")
    • Filter by Customer
    • Filter by Staff
    • Filter by Status: Completed
    • Filter by date range (Start Date / End Date)
  3. Click on the transaction row to open the transaction details page
  4. Verify it's the correct transaction before proceeding

Before refunding - verify:

  • Correct customer name
  • Correct transaction amount
  • Correct items on transaction
  • Refunds cannot be undone

Step 5: Processing a Refund

To refund a completed transaction:

  1. Open the transaction details page
  2. Click the Refund button in the header (next to the Edit button)
  3. The refund dialog appears with the total amount displayed
  4. Select how the refund will be given:
    • Card - Customer receives refund to their card (3-5 business days)
    • Cash - Customer receives cash refund (immediate)
    • Voucher - Coming soon (currently disabled)
  5. Click Confirm Refund
  6. Transaction status changes to "Refunded"

What happens automatically:

  • Transaction status changes to "Refunded"
  • Revenue subtracted from reports
  • Product stock restored (for regular product items)
  • Cash drawer updated (if cash refund selected and a drawer is open)
  • Refund confirmation notification sent to customer (if enabled)
  • Refund timestamp recorded

Important notes:

  • Refunds are for the full transaction amount
  • Refunds cannot be undone
  • Original transaction preserved for records

Step 6: Understanding Stock Restoration

When refunding transactions with products:

Automatic stock restoration:

  1. Refund processed
  2. System identifies product items in transaction
  3. Quantities added back to inventory
  4. Stock levels update immediately

Example:

Original transaction:
- Sold 2x Shampoo bottles (stock decreased from 10 to 8)

After refund:
- 2x Shampoo bottles restored (stock increased from 8 to 10)

Exceptions (no stock restoration):

  • Misc products (custom/ad-hoc items) - These don't have inventory tracking
  • Service items - Services don't have stock to restore
  • Deposit items - Deposits don't involve physical inventory
  • Gift vouchers sold - The voucher remains active after the transaction is refunded

Step 7: After Processing the Refund

Customer communication:

  1. Explain refund processed
  2. Set expectations for payment return:
    • Cash: Immediate (hand cash to customer)
    • Card: 3-5 business days (depends on card issuer)
  3. Apologise if appropriate
  4. Offer solution if service-related (rebook, different stylist, etc.)

Reporting:

  • Refunds appear in financial reports
  • Marked clearly as refunded transactions
  • Net revenue calculated automatically

Step 8: Viewing Refund History

From the transaction details page:

  1. Open any refunded transaction
  2. The status badge shows "Refunded"
  3. A banner displays "REFUNDED" with the refund date and time
  4. The Transaction Info card shows the Refunded timestamp

Filtering for refunded transactions:

  1. Navigate to POS in the sidebar
  2. Use the Status filter dropdown and select Refunded
  3. All refunded transactions are displayed
  4. Click column headers to sort (e.g., by Date & Time to see recent refunds)

Common Pitfalls

"I can't see the refund button"

You need to be an Owner, Admin, or Manager. Staff and Receptionists cannot process refunds. Contact your Manager, Admin, or Owner to process the refund.

"Refund processed but customer hasn't received money"

For card refunds: Takes 3-5 business days to show in customer's bank account. This is the card issuer's processing time, not Luminate. For cash refunds: Should be immediate (hand cash to customer).

"Stock wasn't restored after refund"

Check:

  • Was the item a regular product? (Misc products don't track stock)
  • Did the refund complete successfully?
  • Check product stock levels to confirm

"I refunded the wrong transaction"

Refunds cannot be undone. Options:

  • If customer should have been charged: Create new transaction for correct amount
  • Document the error in notes
  • If accidentally refunded wrong customer: Contact customer, explain, request payment

Tips and Best Practices

  1. Always verify before refunding - Double-check customer, amount, and items. Refunds cannot be undone.

  2. Offer alternatives first - Before refunding, consider: Can service be redone? Is a discount more appropriate?

  3. Refund to original payment method - Cash for cash, card for card. Reduces confusion.

  4. Process refunds promptly - Don't leave unhappy customers waiting.

  5. Track refund rate - If refunds exceed 2-3% of revenue, investigate causes.

  6. Use cancellation for mistakes - If transaction not completed yet, cancel rather than complete then refund. Cleaner records.

Related Tutorials

  • Tutorial 8.1: Understanding Transactions and Payment Status - Transaction lifecycle basics
  • Tutorial 8.3: Gift Vouchers - Selling and Redeeming
  • Tutorial 8.5: Managing Outstanding Balances

Frequently Asked Questions

Can I undo a refund?

No. Refunds are permanent once processed. If refunded in error, create a new transaction for the amount.

Do refunds affect staff commission?

Yes. If staff earned commission on original sale, refund removes that commission.

Can I do a partial refund?

Currently, refunds are processed for the full transaction amount. For partial compensation, consider issuing a gift voucher for the difference instead.

How do I refund a transaction from months ago?

Same process as recent transactions. Find the transaction, verify details, process refund. Older refunds work the same way.

What about tax on refunds?

Tax is automatically recalculated. If original transaction included tax, refund reverses the tax as well.

Do refunded transactions disappear from reports?

No. Refunded transactions appear in reports showing the original sale and the refund, with net revenue calculated.

Last Updated: January 2026