Refunds and Cancellations
Refunding in part or full, what happens to stock, and why refunding at the processor breaks your figures.
Two separate actions that are often confused. Cancelling says the order will not be fulfilled. Refunding returns money. An order can be either, both, or cancelled without a refund because nothing was ever paid.
Cancelling
Cancel Order on the order. It asks whether to restock, and defaults to yes.
Leave that ticked in almost every case. Untick it when the goods are genuinely gone: a parcel already posted, or something damaged while packing.
Cancelling does not move money. An order that was paid and is now cancelled still shows as paid until you refund it, which is correct, because the two are separate decisions.
What cancelling does to stock
The goods go back to the variant and location they came from, and the movement appears in the product's inventory history. An order whose stock was never taken here, such as one imported from a previous shop, is left alone rather than inventing stock that does not exist.
Refunding
Issue Refund on the order. A full refund returns everything; a partial returns an amount you specify.
The refund is sent to the processor that took the payment, so the money goes back the way it came. A card refund reaches the customer on their bank's schedule, usually several working days, which is worth saying when they ask.
A partially refunded order stays partly refunded and still counts towards revenue for the part you kept.
Refund here, never at the processor
Refunding in Stripe or PayPal directly leaves the shop believing it still has the money. The order reads as paid, your revenue is overstated, your tax report is wrong, and nothing tells you. Everything stays wrong until somebody reconciles by hand and finds it.
Refunding Does Not Restock
Deliberately. A refunded item is not always a returned one: you may have refunded a damaged item that is going in the bin, or settled a complaint without wanting the goods back.
Adjust stock yourself when the goods actually return to the shelf, which is also when you can see what condition they are in.
Offline Orders
An unpaid order that will never be paid should be cancelled, not refunded, because there is nothing to return. Cancelling frees the stock it is holding.
If you have taken payment outside the shop, by bank transfer say, and need to return it, do it the same way and then record the refund on the order so your figures match what your bank did.
What the Customer Is Told
Cancelling and refunding each have their own email, switched on under Settings, Notifications.
Both are worth having on. A refund that arrives in somebody's bank with no explanation generates a support email, and a cancellation nobody was told about generates a complaint.
In the Reports
A refunded order is excluded from revenue. A partially refunded one counts for the portion retained.
A refund reduces the period of the original order, not the period the refund happened in. That is correct for filing and surprising if you are comparing a month against a bank statement, where the money moved on a different date.
A Workable Rule
Cancel when the order is not going to ship. Refund when money needs to go back. Do both when a paid order is not going to ship, and do them in that order so the stock is freed before anybody forgets.