How to Automate Refunds and Deposits in ServiceTitan

Are you looking for some quick wins on adding automation features to your business operations? Discover how to save time and reduce errors with ServiceTitan’s user-friendly automated refunds and deposit features.

We dig into these two payment-collection features — automated refunds workflow and auto-applying deposits — with Kim Rahn, Founder and COO at Titan Advising Gurus, during a recent episode of the Mastering ServiceTitan podcast, where we get expert advice from power users. 

Rahn, who’s also the Implementation Success Senior Manager with the Titan N-Tegration Team (TNT), explains how automated refunds and deposits in ServiceTitan can simplify complex workflows, prevent double revenue counting, and ensure accurate accounting. 

Plus, she shares practical advice for setup, common mistakes to avoid, and how these features improve operations for businesses of any size. 

Setting up automated refunds in ServiceTitan 

With automated refunds workflow, you can ditch the error-prone process of adjusting invoices manually when issuing refunds, and let ServiceTitan automate it. Here’s how it works.

“If you choose the reason you're doing the refund, it's going to automatically create the adjustment invoice for you to allow a payment, and potentially an adjustment to revenue, to populate on that adjustment invoice for you,” Rahn says.

Before the automated refunds workflow feature, users often issued refunds and created adjustment invoices manually but failed to make the proper adjustments to revenue.

“When I first started using ServiceTitan, this feature wasn’t available,” Rahn says. “And I can guarantee you, I wasn’t doing it correctly.” 

She explains the proper way to account for refunds:

• Start with an adjustment invoice that includes a negative payment type.

• The negative payment type indicates you’re refunding the money back to the client, whether via check payment through your accounting software, or a payment processed through ServiceTitan Payments.

• Add the negative revenue item. 

  • For example, a refund issued for a billing error or a generic refund to resolve a customer’s complaint. 

• Attach the negative revenue item to the adjustment invoice.

• Add a negative service task, if applicable, to the adjustment invoice.

“Most people aren’t doing that or don't understand it,” Rahn says. “I know there are a lot of small shops out there that either don't have a dedicated bookkeeper, or where the money goes in accounting is kind of a mystery.”

Turning on the automated refunds workflow feature is simple to do, and you only need to set it up once. Just go to your payment collection settings, toggle the button to enable the feature, then choose a generic refund task, such as billing error or customer complaint. 

Then, decide which account you want that refund to hit, such as actual revenue, job income, or an offsetting income account designated as discounts and refunds. You’ll also choose what payment types you want to associate as negative.

“The only reason the setup would be difficult is if you aren't comfortable with your ledgers and where you want your money to hit,” Rahn says. 

If you’re not sure, reach out to your accountant and ask, “Where do my refunds hit? Where do we want them to hit to make sure I’m setting this up correctly?” 

“But once it's done, the actual use of the feature is super easy,” Rahn says. “An icon comes up that allows you to click refund the payment, and it's going to ask you why you're doing your refund. If you hover over your reasons why, it's going to tell you exactly what it's going to do on that adjustment invoice.

“Is it going to affect your revenue or not, or is it just going to affect your payment? And which one of the options that you previously set up are going to populate based on the reason for your refund?” she adds.

Best practices on where refunds should hit

One big mistake that people often make in accounting is thinking that a refund should be added as an expense because it’s costing them money. Rahn says that’s not correct.

“A refund comes over as a negative dollar, a negative item. So, if you're putting a negative into an expense, that would be a positive. So, a double negative there,” she explains. “You need to have your refunds hitting an income account.”

And you can choose a general income or revenue account for simplicity, but some accountants may want to break it down further as job income, materials income, or as specified income for refunds.

“It depends on how granular you want to get with it,” Rahn says. Just remember, “A refund is not an expense. It's a negative income.”

Get familiar with your balance sheet, profit and loss statement, and other important accounting features. If you’re still not sure, ask your accountant the following questions:

• What have my refunds looked like year over year? 

• What did my refunds look like last year? 

• What was my percentage of refunds? 

“If they can't give you that answer, then you're probably not classifying them well,” Rahn says. “It’s tax season. Now’s a really good time to figure out what’s going on with your books.”

>>Click here for instructions on setting up your automated refund workflow in ServiceTitan

Setting up auto-applying deposits in ServiceTitan

You can also alleviate manual workflows with auto-apply rules for deposits. 

“Once a sold estimate is flipped into a return job, it will automatically take that deposit and put it onto that invoice for you,” Rahn explains. “It takes away any of that manual applying of credits to your return jobs.”

The manual way to do this often means a technician uses the “collect deposit” button on their mobile device, triggering a workflow where they sell the estimate, collect the deposit, flip the sold estimate to the return job, then manually apply that deposit from the customer account to the new invoice or the return job. 

“The problem with that is, not always, but that last step can be easily overlooked,” Rahn says. “In which case, your technician is going out, they're doing the work that was sold for a return job, and they’re overcharging the client. They're double collecting that deposit. 

“You now have a credit sitting on the customer account, and more likely than not, you're going to have to refund that deposit, which hurts,” she adds.

Auto-applying deposits is also easy to turn on in ServiceTitan, Rahn says. Go to settings, then invoicing, and then payment collections. Here, you simply toggle over to enable the feature. Once the feature is enabled, it asks you to choose from five different auto-apply rules:

1. Deposits collected on sold estimates in the office

2. Deposits collected on sold estimates on mobile

3. Deposits or credits collected on a project

4. Overpayments collected in the office

5. Overpayments collected on mobile

Rahn says she always turns on the first two for customers, but the remaining three are optional. In addition, you can turn it on for only residential jobs or only commercial jobs, or for specific business units or tags.

“I like to turn on at least the sold estimates. Then, as soon as you sell an estimate, collect a deposit, and flip that estimate, it starts working right away,” Rahn says.

Flipping the estimate means you’ve sold the estimate, collected a deposit for work to be performed at a later time, then the sold estimate appears on your follow-up screen. From there, you click “book a new job” or “book an existing job” from that sold estimate.

“As long as you're following the collect deposit, perform work later, from the technician side, and you're booking the return job from the sold estimate on the office side, then it will work,” Rahn says.

If you don’t collect deposits for the work you perform, then you probably don’t need to turn on auto-applying deposits.

“If you collect deposits for work that you're returning for, where you're collecting partial now and partial later, then I really don't think there's any reason to not have this on,” she adds.

>>Click here for instructions on setting up auto-apply deposit rules in ServiceTitan

Titan Advising Gurus can help

As a ServiceTitan certified provider, Titan Advising Gurus can help you set up these two payment-collection features correctly. Rahn says customers often make mistakes with:

• Classifying refunds as expenses

• Connecting payment types to revenue rather than undeposited funds

• Leaving deposits as unapplied credits

• Not understanding the set-up of how general ledger accounts are used

“We're going to come in and help you clean up or set up your account,” Rahn says. “Making sure your connections between ServiceTitan and your QuickBooks or Intacct are set up properly, that your general ledgers are connected properly, that items in your pricebook have the right general ledgers on them, help with export errors, etc.”

Rahn can also help with setting up Dispatch Pro or Scheduling Pro, or provide overall training.

“Because that's the big thing that I hear, ‘I just can't trust my reports. I just don't trust my numbers.’ Well, let's dive in and figure out why, number one, you can't trust them. And number two, what we can fix so you can trust them,” she says.

You can find this interview and many more by subscribing to Mastering ServiceTitan on Apple Podcasts, on Spotify, or here.

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