Processing Adyen Chargebacks Through a Payout

In this article, we walk through how chargebacks from Adyen are handled in TAPP Adyen for Dynamics 365 Business Central. A chargeback occurs when a cardholder disputes a transaction with their bank — Adyen notifies you through the settlement report, and TAPP Adyen provides several options for how Business Central should respond when that chargeback line is processed from the Adyen Payouts page.

📝 Note: Before chargebacks can be processed, the related settled payment for that transaction must already have been posted as a Cash Receipt Journal. If the original payment has not yet been posted, the chargeback action will be blocked and a warning will be shown.

Overview

When Adyen settles a payout that includes a disputed transaction, that transaction appears as a Chargeback line type in the Adyen Payout Lines. TAPP Adyen handles these lines differently from standard settled or refunded lines — the processing behaviour is driven by a setting in the Adyen Parameters called Chargeback Behaviour.

There are four possible behaviours, ranging from a simple journal entry through to full automated unapplication and credit memo creation:

Chargeback Behaviour	What It Does	Best Used When
None	Creates a journal entry only — no automatic unapplication or credit memo.	Your finance team prefers to handle chargeback accounting manually.
Unapply Only	Creates a journal entry and automatically unapplies the original payment from the customer invoice.	You want Business Central to reopen the original invoice so it can be collected via an alternative payment method.
Create Credit Memo	Creates a journal entry and generates a draft Sales Credit Memo copied from the original invoice.	You accept the chargeback and want to formally write off the disputed amount without pursuing further collection.
Both	Creates a journal entry, unapplies the original payment, and generates a draft Sales Credit Memo applied to the original invoice.	You want the most complete automated handling — the invoice is reopened and immediately closed by the credit memo.

Prerequisites

The Chargeback Behaviour setting must be configured before processing any chargeback payout lines. This is a one-time setup step, typically performed by your system administrator.

1. Use the Search function (Alt + Q) and search for Adyen Parameters, then open the page.
2. Navigate to the Payouts / Settlements section and locate the Chargebacks group.
3. Set the values in the following fields:

Field	Description
Chargeback Behaviour	Controls how TAPP Adyen processes chargeback lines from a payout. See the Chargeback Behaviour Options section below for a full description of each option.
Chargeback No. Series	The number series used to generate document numbers for chargeback journal entries. This must be configured before processing chargebacks.

Chargeback Behaviour Options

None

What it does: Creates a standard Cash Receipt Journal entry for the chargeback amount, with no further automated action.

When to use this: Choose this option if your finance team prefers to handle the accounting implications of the chargeback manually. The journal entry will record the debit against the customer, but the original payment and invoice remain applied — your team will need to resolve the customer ledger entries manually.

What happens when you process:

• A Cash Receipt Journal is created with a Refund document type for the chargeback amount.
• The journal line references the original payment’s PSP reference.
• No unapplication or credit memo creation takes place.
• After posting, the customer ledger will show an open refund entry — your finance team should manually unapply the original payment and reconcile the customer account.

Unapply Only

What it does: Creates a Cash Receipt Journal entry for the chargeback amount and automatically sets the journal line to unapply the original payment from the customer invoice when posted.

When to use this: Choose this option if you want Business Central to automatically reopen the original invoice when the chargeback is posted. This is the most common option for businesses that want to pursue debt collection on the disputed amount — reopening the invoice allows it to be collected via an alternative payment method.

What happens when you process:

• A Cash Receipt Journal is created with a Refund document type for the chargeback amount.
• The Applies-to Doc. Type and Applies-to Doc. No. on the journal line are set to the original payment entry from the customer ledger.
• When the journal is posted, Business Central unapplies the original payment from the invoice, re-opening the invoice balance on the customer account.
• No credit memo is created — the invoice remains open for collection.

💡 Tip: After posting, the customer’s account will show the original invoice as outstanding again. You can then re-invoice or take further collection steps as appropriate.

Create Credit Memo

What it does: Creates a Cash Receipt Journal entry and automatically generates a draft Sales Credit Memo copied from the original posted sales invoice.

When to use this: Choose this option if you want to formally write off the disputed amount by issuing a credit memo against the original invoice. This is appropriate when you accept the chargeback outcome and do not intend to pursue further collection.

What happens when you process:

• A Cash Receipt Journal is created with a Refund document type for the chargeback amount.
• TAPP Adyen looks up the original posted sales invoice linked to the payment and creates a new Sales Credit Memo by copying all lines from that invoice.
• The credit memo is created in draft (unposted) state — your finance team must review and post it separately.
• The credit memo is created without an applied-to document, meaning it will not automatically close the invoice when posted. Your team should verify the application before posting.
• The chargeback journal line does not unapply the original payment — the credit memo is intended to be the vehicle for closing the invoice.

📝 Note: If the original posted invoice cannot be found (for example, if the invoice was processed outside of TAPP Adyen or the payment-to-invoice link was not created), the credit memo creation will fail. The payout line will be flagged with a note indicating the failure — review the payout lines before proceeding.

💡 Tip: After creating the journal, navigate to the Chargebacks tab in the payout line details to find the Credit Memo No. field, which will show the draft credit memo that was created. Open it to review and post it.

Both

What it does: Creates a Cash Receipt Journal entry, automatically unapplies the original payment, and generates a draft Sales Credit Memo applied to the original invoice.

When to use this: Choose this option if you want the most complete automated handling of a chargeback. The original invoice is reopened via unapplication, and a credit memo is immediately applied against it to close it — effectively writing off the balance in full while the cash receipt journal records the chargeback debit.

What happens when you process:

• A Cash Receipt Journal is created with a Refund document type for the chargeback amount.
• The journal line is set to unapply the original payment entry from the customer ledger (same as Unapply Only).
• A Sales Credit Memo is copied from the original posted sales invoice and is created with Applies-to Doc. Type set to Invoice and Applies-to Doc. No. set to the original invoice number — meaning that when the credit memo is posted, it will automatically close the reopened invoice.
• The credit memo remains in draft state — review it before posting.

💡 Tip: The recommended workflow when using Both is: 1. Process the chargeback to create the journal and credit memo. 2. Post the chargeback Cash Receipt Journal. 3. Review and post the Sales Credit Memo — this will close the invoice that was reopened when the journal posted.

📝 Note: As with Create Credit Memo, if the original invoice cannot be resolved the credit memo creation will fail, the journal lines will be rolled back, and the payout line will be flagged with a note.

Processing Chargebacks Step by Step

Step 1 — Navigate to Adyen Payouts

• Use the Search function (Alt + Q) and type Adyen Payouts, then select the page from the results.
• In the action bar, click the Chargebacks tab to filter the list to payouts that contain chargeback lines.

Step 2 — Select the Payout

Click on the payout row that contains the chargeback(s) you want to process. Verify the Settlement Date and Adyen Merchant are correct.

In the lower Payout Lines panel, you can see the individual lines for this payout. Lines with a Type of Chargeback are the lines that will be processed.

📝 Note: If the Chargeback Created toggle is already enabled (blue), the chargeback journal for this payout has already been created. Use Post Chargeback/s to post it, or View Receipts to review the existing journal.

Step 3 — Process the Chargeback

• With the payout selected, click Process Chargeback/s in the action bar.
• TAPP Adyen will validate that the original payments for all chargeback lines in this payout have already been posted. If any are unposted, a message will appear — resolve those payments first before continuing.

If validation passes, TAPP Adyen will:

• Refresh the Applies-to fields on all chargeback payout lines based on the configured Chargeback Behaviour.
• Create the Cash Receipt Journal entries.
• (If applicable) Create draft Sales Credit Memos for each chargeback line.

Once complete, the Chargeback Created toggle at the top of the page will switch to enabled (blue) and a confirmation message will appear.

Step 4 — Review the Journal

• With the payout selected, click the View tab in the action bar, then click View Receipts. This opens the Cash Receipt Journal so you can review the generated lines before posting.
• Verify that each journal line reflects the correct amounts, customer accounts, and document references.

📝 Note: The View Receipts action is context-sensitive. Before the journal is posted, it opens the Cash Receipt Journal for review. Once the journal has been posted, the same action will instead open the related G/L Register, allowing you to verify the posted entries.

Step 5 — Post the Chargeback

1. Return to the Adyen Payouts page and click Post Chargeback/s in the action bar.

When posting is successful, the Chargeback Posted toggle will switch to enabled. The corresponding customer ledger entries and G/L entries will be created in Business Central according to the configured Chargeback Behaviour.

📝 Note: Once a journal is posted it cannot be unposted. If corrections are needed after posting, a reversal or correcting journal entry must be created manually.

Testing Chargebacks in Sandbox

TAPP Adyen includes a built-in payment simulation feature that allows you to trigger chargeback scenarios directly from within a Sales Invoice, without any external tooling. This is only available when connected to a sandbox (test) environment.

How It Works

When you process an Adyen payment in sandbox mode, you can supply a special holder name value that instructs Adyen to simulate a specific chargeback outcome for that transaction. TAPP Adyen passes this value as the holderName field in the payment request.

After the payment is captured in Adyen, it passes through the normal settlement cycle (Sent for Settlement → Settled → Chargeback). This process can take up to 24 hours in the sandbox environment. Once the chargeback webhook is received and the settlement report is generated, the chargeback line will appear in the Adyen Payouts page and can be processed as normal.

Step 1 — Open the Sales Invoice

Open the posted or unposted Sales Invoice you want to use for the chargeback test.

📝 Note: The simulation group is only visible when your environment is connected to the Adyen sandbox. If you do not see the Adyen Payment Simulation (Sandbox Only) section on the invoice, verify that the sandbox toggle is enabled in your Adyen Parameters.

Step 2 — Set the Simulation Holder Name

1. Scroll to the Adyen Payment Simulation (Sandbox Only) section on the invoice.
2. Click the Adyen Payment Simulation field. A dialog box will appear prompting you to enter a holder name.
3. Enter one of the supported chargeback simulation values (see the table below).
4. Click OK to confirm. The value will be stored in memory and used on the next payment request for this session.

Chargeback Simulation Values

The holder name you enter determines which chargeback scenario Adyen will simulate. The most common values are:

Holder Name Value	What It Simulates
Chargeback	A full chargeback with no explicit reason code.
Chargeback:{reason_code}	A full chargeback with a specific reason code (e.g. Chargeback:10.4).
Chargeback Reversed	A chargeback that is then reversed (won dispute).
Second Chargeback	A second chargeback (escalated dispute).

You can also simulate partial chargebacks or chargebacks in a different currency by appending an amount in minor units and a currency code — for example, Chargeback:10.4 9000 EUR. For the full list of supported values and format details, refer to the Adyen test chargeback example values in the Adyen documentation.

Step 3 — Process the Payment

With the simulation value set, process the Adyen payment on the invoice as you normally would. TAPP Adyen will include the holder name in the payment request sent to Adyen.

Step 4 — Wait for the Chargeback to Appear

After the payment is captured, Adyen will simulate the chargeback flow. The payment moves through settlement stages and — once the chargeback is triggered — the settlement detail report for the relevant period will include a Chargeback line.

Once that settlement report is imported into Business Central (automatically, on the next scheduled sync), the chargeback line will appear in the Adyen Payouts page and can be processed using the steps described earlier in this article.

💡 Tip: The simulation cycle in the Adyen sandbox can take up to 24 hours. If the chargeback line has not yet appeared in payouts, check back the following day.

Chargeback Reversal

If Adyen later reverses a chargeback (for example, the dispute was resolved in your favour), the settlement report will contain a ChargebackReversed line. These lines must be processed manually using the Process Chargeback Reversals action on the Adyen Payouts page.

1. Navigate to the Adyen Payouts page and select the payout that contains the reversal line.
2. In the action bar, click Process Chargeback Reversals.
3. TAPP Adyen will process the ChargebackReversed lines within the selected payout and create the appropriate journal entries to reverse the original chargeback accounting.

Status Toggles Reference

The following status toggles on the Adyen Payouts page relate to chargeback processing:

Field	Description
Chargeback Created	A chargeback Cash Receipt Journal has been created for this payout.
Chargeback Posted	The chargeback journal has been successfully posted.

Related Articles

• Processing Cash Receipt Journals for Adyen Payouts
• Issue a Refund for an Adyen Payment
• Cancel an Adyen Payment Request
• Generate an Adyen Payment Request
• Parameters