Refunds vs Returns

Understanding the difference between refunds and returns and how Profitario processes them.

What Is a Refund?#

A refund is a monetary return to the customer. It reduces the revenue associated with an order. Refunds in Shopify can be full or partial and may or may not include restocking of items.

What Is a Return?#

A return is the physical process of receiving goods back from the customer. A return typically triggers a refund, but the two are tracked separately in Shopify.

How Profitario Processes Refunds#

When Shopify sends a refund to Profitario, each refunded item is recorded individually with its own quantity, refund amount, and restock status. Profitario then recalculates the impact of the refund on that order:

• The refunded amount is added to your Refund Amount metric.
• The refunded tax is removed from your Tax metric.
• The refunded shipping (if any) is removed from your Shipping metric.
• If items are restocked and you have the matching setting enabled, their cost is added back to your Gross Profit (see below).

Refunds are captured both from Shopify webhooks in real time and during a full historical import when you first connect your shop.

Partial Refunds#

Profitario handles partial refunds at the line-item level, not as a percentage of the order.

If a customer returns 1 of 2 items in a $100 order:

• Only that item's revenue is refunded.
• Only that item's cost is reversed (if restock recovery is enabled -- see below).
• Shipping, tax, and fees are only refunded in the amount Shopify actually refunded.

This means a partial refund never subtracts more cost than the specific items that were returned.

COGS Recovery on Restock#

When items come back into inventory, their cost can either stay as a cost on your books or be added back to your Gross Profit. This is controlled by a setting:

• Keep cost deducted (default) -- The cost of refunded items stays in COGS, regardless of whether they were restocked. This is the more conservative choice: inventory that has been sold is treated as consumed.
• Recover cost on restock -- The cost of items marked as restocked (returned to inventory or cancelled before fulfillment) is added back to Gross Profit. Items marked as not restocked (damaged, lost, goodwill) are not recovered -- their cost stays as a full loss.

You can change this in Refund Settings Guide.

Restock Status Comes From Shopify#

The restock decision is made by you or your staff in Shopify at the time the refund is issued. Profitario reads that flag and uses it -- it does not change your inventory.

Refund Date Attribution#

Profitario offers two options for when refund amounts appear in your reports:

• Processing date (default) -- The refund shows on the day it was processed. This matches cash-flow reality -- money left your account that day.
• Original order date -- The refund is attributed back to the date of the original order. This retroactively lowers the profitability of that earlier day.

This setting is configured in Refund Settings Guide and changes how refunds appear in daily charts and period comparisons.

What Does Not Get Refunded#

Some order costs are not reversed when a refund happens, because they cannot be recovered in real life:

• Transaction fees -- Payment processors typically keep their fee even when you refund the customer.
• Ad spend -- The money you spent acquiring the customer is already gone, whether or not they return the order.
• Handling fees -- If you set a flat handling cost per order, it stays as a cost.

This is intentional: these are real costs to your business that a refund does not give back.

Impact on Reports#

Refunds affect several reports in Profitario:

• Dashboard -- Refund Amount, Refund Count, and Refund Rate are shown alongside revenue and profit. The refund amount is always subtracted from Net Profit.
• Income Statement -- Refunded revenue, tax, and shipping are shown as separate line items. Restocked COGS (if enabled) appears as a recovery line.
• Products Report -- Products sold that were later refunded are deducted from the product's net sales and net profit.
• Orders List -- Refunded orders show a refund indicator and the refunded amount.

Cancellations Are Different#

If an order is cancelled before fulfillment (rather than refunded after delivery), Profitario treats it through a different path. See How Cancellations Are Treated.

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